Dubai: Dubai Economy Tracker Index (DET) declined to 53.3 in October from 55.1 in September, signalling the slowest rate of expansion since April.
October data signalled a further improvement in business conditions across Dubai’s private sector economy, underpinned by strong rises in output and incoming new work. At 53.2 in October, the seasonally adjusted Emirates NBD Dubai Economy Tracker Index registered above the crucial 50 no-change value for the eighth month running.
While this is well above the neutral 50-level, it is lower than the 60.7 average recorded in the third quarter of this year. New work increased at the slowest rate in six months with this subindex at 55.4. Despite slower growth in new work and output, private sector firms in Dubai were more optimistic on average in October, with the business expectations index at 75.8 — the highest reading since June 2015.
“The softer reading for the Dubai Economy Tracker in October is consistent with what we’ve seen at [a] national level, and comes off a strong third-quarter performance. Although the headline indices are lower, output and new work growth remains strong, and we remain comfortable with our forecast of 3.5 per cent economic growth in Dubai this year,” Khatija Haque, Head of MENA Research at Emirates NBD, said.
Business activity continued to rise at a robust rate, with this subindex at 57.9 last month. Improving operating conditions reflected another strong upturn in business activity across the Dubai private sector economy in October. The rate of output growth was faster than the long-run survey average, but nonetheless eased since September to its weakest for six months.
Employment was marginally lower in October, with firms citing pressure on margins and more cautious staff hiring policies. Indeed, output prices fell at the fastest rate since February as firms competed for new work. Fortunately, input costs were broadly unchanged for the second month in a row.
The sector surveys of the Dubai Economy Tracker show that the slowdown in expansion was evident across all the main sectors in Dubai last month. However, tourism and travel continued to outperform, supporting the wholesale and retail sector, while the construction sector remains the most sluggish.
The wholesale and retail sector index declined to 53.3 in October, pointing to the weakest improvement in business conditions since March. Although output growth was strong at 57.9, it was slower than the previous five months. New work growth also slowed but remained solid at 55.4 in October.
Consistent with trends across Dubai, output prices and employment in this sector declined last month, although the extent of price discounting was slightly lower on average than in the third quarter.
“In our view, strong growth in output in the tourism and travel sector has supported activity in the wholesale and retail trade sector, and this is likely to remain the case in the coming months. However, as in the hospitality sector, we expect pricing power to remain weak as firms absorb the impact of relative USD strength,” said Haque.
The construction sector index fell to 51.8 in October, its lowest level since February 2016, largely on the back of slower output growth. The output index declined to 55.5 from 57.9 in September, while new work was largely unchanged at 52.3. The construction sector saw employment rise last month, but at a slightly slower rate than in September. Overall employment growth remains modest at 51.2.
Profit margins came under further pressure in October, as input costs rose at the fastest rate in over a year, while output prices declined from September due to increased competition.