Emirates NBD Dubai Economy Tracker

4 Min | 09 June 2015

Dubai's private sector output expands at slightly faster pace in May, but growth remains weaker than at the start of 2015

Dubai’s private sector output expands at slightly faster pace in May, but growth remains weaker than at the start of 2015

Dubai, June 9, 2015: Dubai private sector companies indicated a modest rebound in output growth from the 18-month low recorded during April, according to the latest Emirates NBD Dubai Economy Tracker™ report. The latest survey also pointed to a slightly faster expansion of incoming new work, while modest job creation and positive sentiment regarding the business outlook was sustained. Of the three key sub-sectors monitored by the survey, construction was the best performing in terms of output and employment growth, largely reflecting a sharp and accelerated increase in new development projects.

This press release contains the second release of data collected from a new monthly survey of business conditions in the Dubai non-oil private sector. Sponsored by Emirates NBD and produced by Markit, the survey provides an early indication of operating conditions in Dubai. The survey covers the Dubai non-oil private sector economy, with additional sector data published for travel & tourism, wholesale & retail and construction.

Commenting on the Emirates NBD Dubai Economy Tracker, Tim Fox, Chief Economist at Emirates NBD, said:

“May’s improvement in the Dubai Economy Tracker is very encouraging as it illustrates the resilience of the Dubai economy in the face of ongoing headwinds such as the strong dollar. To our mind it appears to be consistent with other tentative signals that suggest that Q1 may have been the low point for growth during the year. However, it is clear that businesses remain concerned about the outlook and with US interest rates likely to rise in H2 there is some basis for confidence to be guarded.”

Key Findings:

Business activity growth picks up for the first time since January...
...helped by faster rises in construction and travel & tourism activity
New work also expands at sharper pace, but is still the second-slowest since March 2012
Business activity and employment
At 57.6 in May, the seasonally adjusted Emirates NBD Dubai Business Activity Index picked up slightly from 57.2 in April and remained well above the 50.0 threshold that separates growth from contraction. The latest reading was exactly in line with the average since the series began in 2010, but this still signalled a slower growth path than the peak seen at the start of this year.

By sub-sector, construction remained a key engine of output growth, with the respective index at 62.7, up sharply from 59.6 in April. Wholesale & retail experienced a moderation in activity growth (index down to 56.5, from 58.4), while travel & tourism under-performed to a lesser extent in May (index up to 54.1, from 52.3 in April).

Sustained business activity growth contributed to a moderate increase in private sector employment during May. Net job creation has now been recorded for almost three-and-a-half years, although the pace of staff hiring remained slightly weaker than the average seen over this period.
Emirates NBD Dubai Economy Tracker™

Incoming new work and business activity expectations
May’s survey highlighted a slight acceleration in new business growth from the 37-month low recorded in April. However, the latest expansion was still the second-weakest over this period. Survey respondents commented on intense competition for new work and a more subdued appetite for spending among clients. The main exception was the construction sector, where new work increased at a sharp and accelerated pace.

With new business growth remaining well below the trends seen during much of the past three years, Dubai private sector companies indicated greater caution about their prospects for activity growth over the year ahead. Although still indicative of strong overall confidence, the degree of positive sentiment towards future business activity was the least optimistic since this index began in early-2012. Moreover, business confidence moderated in all three key sectors monitored by the survey in May.

Input costs and average prices charged
On the prices front, the latest survey pointed to only a marginal rise in average cost burdens. Nonetheless, the rate of inflation picked up slightly to its fastest for three months, with construction sector costs increasing at a particularly marked pace. Meanwhile, strong competition for new work encouraged firms to reduce their output charges in May. Although only modest, the overall rate of price discounting was the sharpest recorded for just over two years, led by the travel & tourism sector.
Emirates NBD Dubai Economy Tracker: Sector summary

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