Dubai: Dubai economy recorded faster output and new orders growth according to the Emirates NBD Dubai Economy Tracker Index (DETI), which increased to 56.5 in June from 55 in May.
The latest index reading was above the long-run series average (55.2). However, employment remained broadly unchanged at 50.2, the lowest reading since February this year.
By sector, wholesale & retail (index at 58) was the best performing category, closely followed by construction (index at 57.4). The travel & tourism sector (54.4) experienced the slowest improvement in business conditions.
“The June Dubai Economy Tracker survey supports our view that Dubai’s economy has grown at a faster rate in the first half of 2017 compared with the same period last year. The wholesale and retail trade sector likely benefitted from increased household spending during Ramadan, which was in June this year, while the increased activity in the construction sector probably reflects progress on a number of infrastructure projects in Dubai,” said Khatija Haque, Head of MENA Research at Emirates NBD.
The overall improvement in the health of Dubai’s private sector reflected another sharp rise in business activity. The rate of growth accelerated from May’s seven-month low, and was sharp overall. The combination of more projects, promotional activities and inflows of new business contributed to greater business activity, according to anecdotal evidence.
Inflows of new business continued to rise for the sixteenth consecutive month during June. The rate of expansion was faster than May’s seven-month low, matching the trend seen for output. Survey respondents reported that the increase in new orders was supplemented by enhanced marketing and promotional discounting initiatives.
Despite sharper improvements in the health of all three key sub-sectors, business confidence towards the 12-month outlook slowed to the weakest since August 2016. Firms expect greater marketing and sales efforts, combined with improvements in overall business conditions will lead to output growth in the coming 12 months.
On average, firms in Dubai cut selling prices in June, even though input costs rose slightly. However, this was largely driven by discounts in the travel & tourism and to a lesser extent the wholesale & retail trade sectors, while firms in the construction sector were able to increase selling prices marginally last month.
“Businesses surveyed remained optimistic about their prospects over the coming year, although the degree of optimism eased from May, to the lowest reading in 11 months. Of the three key sectors surveyed, wholesale & retail trade was the outperformer in June, with this sector index rising to 58.0 from 55.5 in May. The sector was likely buoyed by spending over Ramadan and the Eid holidays, which fell in June this year,” Haque said.
The construction sector index rose to 57.4 in June from 56.2 in May as both output and new work growth accelerated sharply last month. Firms attributed the rise in output to more projects, although they also noted that improved client demand was supported by “promotional activities”. On average however, selling prices in the construction sector were slightly higher than in May last month, with this sub-index rising to 50.5 from 50.1 in May. Despite the rise in output and new work, employment in the construction sector declined in June, with this sub-index falling to 48.4 from 51.1 in May.
Business conditions in the travel & tourism sector improved again in June, but at a slower rate than both construction and wholesale & retail trade sectors.
The wholesale & retail trade sector index rose to 58.0 in June, the highest reading since February this year. Despite the very strong rise in activity and new work, employment in the sector was broadly unchanged (at 50.5), slower than the job growth seen in April and May.
