Dubai’s private sector business conditions improve

Dubai: September data signalled a sharp improvement in business conditions in Dubai’s non-oil private sector, driven by steep expansions in output and new business. However, the rate of growth eased since August.

The Emirates NBD Dubai Economy Tracker Index (DETI) slipped to 55.2 in September from 56.3 in August, but still signals a solid rate of growth last month. Almost all the components of the index were weaker in September, except for employment which increased to 51.0, the highest reading since April. Despite the rate of growth softening in September, it remained in line with the survey’s historical average.

“The September survey points to a continued solid expansion in Dubai’s economy, with retail and wholesale trade and construction data particularly encouraging. Year to date, the Dubai Economy Tracker index has averaged 56.3, markedly higher than the average for the same period last year, which supports our view that Dubai’s GDP growth is likely to accelerate this year,” said Khatija Haque, Head of MENA Research at Emirates NBD.

Output in Dubai’s non-oil private sector rose at a sharp rate in September. The latest finding extended the current sequence of growth to 19 months. Strong growth was indicated in all three monitored sectors, with the fastest expansion being recorded in the construction sector. Firms commonly noted that strong underlying demand for goods and services produced in Dubai had led to increased output requirements in the most recent survey.

After declining for most of the third quarter, the wholesale and retail trade sector index jumped to 58.1 in September. The main driver was surging new orders which increased at the fastest rate since February. Some firms attributed the increase in new work to promotional activities. Average prices in the wholesale and retail trade sector were marginally positive last month at 50.6, the first time the selling price index has been above 50 in nearly two years. However, input cost inflation rose sharply last month, keeping pressure on margins.

The headline construction sector index eased slightly to 55.2 in September from 55.8 in August, but indicates a still solid rate of expansion in the sector last month. Output and new work increased strongly at 62.4 and 58.3 respectively. However, average selling prices declined for the second month in a row. Survey data suggests that growth in the construction sector has been much stronger year-to-date compared with the same period in 2016, which is in line with expectations.

The travel and tourism index declined to 52.9 in September from 55.1 in August, the lowest reading since May 2016. Both output and new work increased at a much slower rate in September, despite significant output price declines. Selling prices in September fell at the fastest rate since October 2016, while input costs declined only modestly.

Job creation was recorded for the seventh month running in September. The rate at which employers hired additional staff was the fastest since April. That said, the rate of growth remained only slight overall and below the long-run series average.

The latest survey data signalled growth of new business for the nineteenth month running. Panel members that reported higher inflows of new work frequently mentioned improving economic conditions and better marketing techniques.

An uptick in business confidence was registered in September. Moreover, optimism reached a four-month high, matching that registered in May. Many respondents forecast that product innovations and a general economic upturn will lead to greater output over the next 12 months.

Input price inflation eased in September and registered below the long-run series average of 53.6. Both rising wages and higher purchase prices contributed towards the rise in average cost burdens.