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Dubai’s private sector bolstered by strong January numbers

But cost of doing business continues to rise and only partially offset by hiking selling prices

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A worker at an Aluminum Downstream plant in Jebel Ali.
Gulf News

Dubai: Dubai’s private sector economy recorded its best set of numbers in five months during January, according to the latest Emirates NBD tracker. But businesses also had to contend with further increases in operating costs, brought on in large part by VAT.

The rate of cost price inflation rose to the highest since October 2011 and extended the sequence of cost inflation to 23 months.

Businesses countered by adding this to their selling prices, which rose “at the fastest pace in three years in January, again linked to VAT”. There were “record increase” in the wholesale and retail sector, while the inflation in construction “almost matched December’s record high”.

In contrast, output prices in the travel and tourism sector were unchanged in January compared with a month earlier.

“The rise in the Dubai Economy Tracker Index signals a strong start to 2018, despite the introduction of VAT putting upward pressure on both input and output prices,” said Khatija Haque, Head of MENA Research at Emirates NBD. “The construction sector had a particularly strong month in January, and this supports our view that construction will be a key driver of Dubai’s growth this year.”

By sector, wholesale and retail (index at 56.1) was the best performing category, followed by travel and tourism (55.7) and construction (55.2) respectively. All three categories registered stronger growth than in December. (A reading of below 50.0 indicates that the non-oil private sector economy is generally declining.) Overall, the rate of expansion for private businesses was “stronger than the long-run series average (since January 2010)”. At the sector level, construction companies noted the steepest increase in output during the survey period, followed closely by wholesale & retail.

Job creation in the private economy registered gains for an 11th consecutive month in January.

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