Dubai: Dubai’s non-oil private sector economic activity signalled strong growth in January, according to the Emirates NBD Dubai Economy Tracker Index (DET).
January data showed the DET rose to 57.1 from 55.9 in December, the highest reading since February 2015. Business activity expanded at a faster pace across the whole of Dubai while new work growth was the fastest since March 2015.
“As we have noted throughout 2016, the strong rise in activity and new orders volumes were driven partly by competitive pricing and promotional activity, and this appeared to be the case again in January,” said Khatija Haque, Head of Mena Research at Emirates NBD.
The survey data showed that all the three key sub-sectors monitored by the survey recorded marked rates of expansion.
By sector, travel & tourism remained the best-performing category at the start of the year with the index at 57.8, closely followed by wholesale & retail (57.7) and construction (55.4).
The wholesale & retail sector signalled the strongest rate of activity growth in seven months, with some firms linking the increase to promotional activities to increase in demand. Meanwhile, construction firms widely cited new projects as the principal factor behind the increase in output.
Output prices declined on average in January, with this index easing further to 47.5, despite higher input costs.
Employment increased in January but the rise was modest, with the employment index at just 51.3. Firms were still optimistic about the coming 12 months, although the business expectations index declined to 70.9 in January from 74.5 in December.
Output price index
The travel & tourism sector index rose to 57.8 in January from 56.9 in December, the highest reading since the survey began in March 2015. Output also rose at the fastest rate on record last month and while new order growth slowed marginally, it remained exceptionally strong with an index level of 63.3.
“Encouragingly, this strong growth in activity and new work was achieved even as firms in the sector increased prices at the fastest rate since the series began. The output price index rose to 54.6 in January from 51.2 in December. Input costs rose at a slower rate last month (52), providing some relief from the margin compression that was evident in 2016,” said Haque.
The wholesale & retail trade sector index climbed to 57.7 in January from 56.4 in December, signalling the fastest rate of expansion in the sector since June 2016. New orders grew at the fastest rate on record (65.7) and the output index also rose in January, reaching 62.7.
The construction sector index rose to 55.4 in January from 54.3 in December, the highest reading since May 2016, on faster growth in output and new work. Firms surveyed cited improved market conditions and new projects as reasons for the rising new orders and output last month. The Dubai government budget for 2017 allocated more funds for infrastructure spending, as the emirate gears up for Expo 2020, and this is likely to underpin activity in the construction sector over the next three years.
US dollar
Last year was a challenging year for non-oil private sector firms in Dubai, as fiscal consolidation, weaker confidence on the back of lower oil prices, and a strong US dollar proved to be something of a triple-whammy. Firms responded partly by lowering selling prices to help offset the impact of dollar strength, thus helping to supporting demand. However, employment largely stagnated as tighter margins forced firms to keep costs contained.
“Overall, we expect economic conditions in Dubai to improve this year, provided oil prices remain in the $50-60 [Dh183.50-220] per barrel range, and government spending on infrastructure rises as forecast,” Haque said.
