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Dubai / WAM
The health of the non-oil private sector in Dubai improved at a marked rate in June. Although the headline index fell from May’s recent peak, reflecting easing travel and tourism growth momentum, stronger expansions were registered in both the wholesale and retail and construction sectors.
Furthermore, business confidence accelerated to a survey-record high in June amid a strong pipeline of new projects and outstanding work.
The seasonally adjusted Emirates NBD Dubai Economy Tracker Index – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – fell to 56.0 in June, from 57.6 in May. Despite the headline figure falling from that recorded in May, it remained at a level indicative of a marked expansion that was above the historical average.
Wholesale and retail was the strongest performer in June (58.6), followed by construction (57.1) and travel and tourism respectively (54.9).
A reading of below 50.0 indicates that the non-oil private sector economy is generally declining; above 50.0, that it is generally expanding. A reading of 50.0 signals no change.
The survey covers the Dubai non-oil private sector economy, with additional sector data published for travel and tourism, wholesale and retail and construction.
Commenting on the Emirates NBD Dubai Economy Tracker, Khatija Haque, Head of MENA Research at Emirates NBD, said: “Despite the decline in the headline DET index in June, new work and output both increased at a sharp rate, reflecting strong demand. The wholesale and retail trade sector performed particularly well last month, which may have been partly due to the Eid holidays. The sharp improvement in business conditions in the construction sector supports our view that infrastructure investment will be an important driver of economic growth
this year.”
Although business activity growth softened from May’s 40-month high, the pace of expansion remained sharp overall. Furthermore, the latest improvement extended the current phase of rising output that began in March 2016. Firms commonly cited favourable business conditions and strong inflows of new work as reasons behind higher
business activity.
Job creation remained subdued in the latest survey. The rate of growth was fractional overall, matching that recorded in May. According to anecdotal evidence, some firms hired additional staff in anticipation of new project starts, although these were negated by those that reduced payroll numbers to cut costs.
June data signalled a steep expansion in new work across Dubai’s non-oil private sector. Although the rate of growth softened from that seen in May, it remained strong overall and above the long-run average.
Business activity expectations improved to the highest since this index began in April 2012 in June. Anecdotal evidence suggested that marketing initiatives, solid business conditions and a strong pipeline of new orders underpinned optimism.
Average cost burdens increased at a slower rate in the latest survey period. Whilst input price inflation continued for the third month running, the degree of cost pressure was the weakest in this sequence.
Output charges dropped in June amid promotional efforts across the non-oil private sector. The degree of price discounting was marginal overall, however.