Dubai: The Emirates NBD Dubai Economy Tracker Index (DETI) for May points to strong but slower growth in Dubai’s economy, which is consistent with the UAE and Saudi Arabia PMI surveys for May.
DETI declined to 55 in May from a 26-month high of 57.7 in April. Firms surveyed indicated that more projects, particularly in the construction sector, boosted business activity in May. Employment (50.7) rose slightly in May.
“The decline in the DETI in May is consistent with what we’ve seen in the regional country surveys. However, the data still points to a robust expansion in the non-oil private sector last month. The construction sector survey is particularly encouraging with the sector index near the highest level in one-and-a-half years,” said Khatija Haque, Head of Mena Research at Emirates NBD.
The latest reading signalled the slowest pace of improvement observed in non-oil private sector of Dubai seven months. Sub-sector data indicated that construction companies experienced the fastest improvement in business conditions with the index at 56.2, followed by wholesale & retail index at 55.5 and travel & tourism at 54.2.
Input cost inflation
The construction sector index eased off April’s high, still signalling a strong expansion in the sector last month. Output and new work growth remained very strong in May, and businesses were more optimistic about the prospects for the coming year. Input cost inflation eased in May, and selling prices were stable after significant discounting in the prior seven months. Employment increased in May at a slightly slower rate than in April, and remains weak overall. The sector is expected to continue to benefit as preparations for Expo 2020 projects.
The wholesale & retail trade sector saw strong expansion in May, but at a slower rate than in April. New orders rose sharply, supported by further promotional activity although selling prices decreased at a slower rate than in March and April.
The travel & tourism sector index fell to 54.2 in May from 57.0 in April. Output and new work indices both declined sharply, although they still reflect solid growth at 55.8 and 58.3 respectively. Employment in this sector was broadly unchanged in May.
Positive sentiment
Survey data showed that Dubai’s private sector companies are optimistic about their growth prospects for the year ahead. The degree of positive sentiment accelerated to a three-month high, driven by improved optimism across all three monitored key sectors.
Input costs were close to unchanged last month as were selling prices. The latter is particularly encouraging after seven months of price discounting. The increase in input costs in construction and wholesale & retail firms offset a decline reported by travel & tourism firms. Led by construction firms, output charges rose for the first time in 11 months. Firms in the travel & tourism and wholesale & retail sectors offered discounts to stimulate demand amid reports of intense competition.
“The Dubai Economy Tracker Index is a good proxy indicator for Dubai’s real GDP growth. Our analysis shows that the correlation between the average quarterly reading for the DETI and official real GDP growth in Dubai is 68 per cent. The rise in the DETI year-to date provides support for our view that Dubai’s economic growth is likely to accelerate this year,” said Haque.
