Dubai: Businesses operating in Dubai’s wholesale and retail sector recorded the sharpest improvement in confidence, helped by new orders, as did the travel and tourism sector. This helped overall sentiments among UAE private businesses to a 52-week high, according to the economy tracker for May.
The other strategically vital sector — construction — maintained upbeat sentiments that were on par with what it has been recording for some time now. In general, the private sector in Dubai reflected a mood of confidence that businesses elsewhere in the UAE reported for May.
On the jobs’ side, only retail saw new intakes, while the other two sectors are still operating on a lean workforce principle.
“The earlier start to Ramadan this year may also have contributed to increased activity, particularly in the wholesale and retail sector,” said Khatija Haque, Head of MENA Research at Emirates NBD.
As per the Emirates NBD Dubai Economy Tracker Index, the wholesale and retail ended May with a 61.9 score, while travel and tourism had 59.5 and construction 54.6. This helped push the overall economy index to a 52-month high of 58.5 in May, from 57.9 in April.
“The record increase in total activity was driven by faster growth in new business — faster intakes of new work contributed to another improvement in 12-month expectations for activity across the non-oil private sector in May,” the report notes.
Incidentally, this is the fourth time in the first five months that non-oil private sector activity has shown gains. “Growth rates were at new peaks in travel and tourism and wholesale and retail, while construction posted the second-fastest increase on record,” the report adds.
Job creation sputters
The Index tracker notes that employment opportunities remain on the weaker side.
“Jobs continued to decline in both the travel and tourism and construction sectors,” but wholesale and retail managed to post the biggest improvements in three years. (Over the past 12 months, the Employment Index has averaged exactly 50.0.) But businesses have other worries to contend with — as has been the case in recent months, May’s order gains came about on lower prices being quoted.
“Prices charged for goods and services fell for the 13th month running, albeit at the slowest rate in three months,” the report says. “Discounting was most notable in the construction and wholesale and retail sectors.”
Going forward, businesses will need to break the spiral of offering discounts to win orders. How soon they manage to break out of this cycle will determine not just the well-being of the private sector but the overall economy as well.
But for the moment, businesses are basking in the buzz of new orders streaming through. “Travel and tourism and wholesale and retail both registered sharp increases in new work during the month,” the report says. “Faster intakes of new work contributed to another improvement in 12-month expectations for activity across the non-oil private sector in May.”
May’s trends in three key sectors
* Dubai’s travel and tourism firms cut their prices for a second month running in May, having increased them in the first three months of 2019. But the rate of discounting was marginal, according to the Emirates NBD economy tracker.
* Wholesalers and retailers cut prices for a 13th successive month, though the “rate of discounting eased to the weakest since September 2018”.
* New business placed with local construction firms rose at the strongest rate since last November. Construction firms were confident regarding the 12-month outlook for activity levels.