Non-oil sector conditions also improved at the fastest rate in 13 months in May, according to the bank's index
Business sentiment in Dubai at record high, says Emirates NBD
Positive sentiment for Dubai's future projects in May was the highest ever recorded by Emirates NBD's Dubai Economy Tracker Index since the gauge was launched in April 2012.
Non-oil sector conditions also improved at the fastest rate in 13 months in May, with the wholesale and retail and travel and tourism sectors driving the momentum, according to the index.
“Positive sentiment towards future growth prospects reached a series-record high in May,” Emirates NBD said in a statement on Monday. “New project wins, Expo 2020 and forecasts of robust demand underpinned business confidence.”
Dubai’s economy, which suffered an economic slowdown in the past few years, is expected to have stronger growth this year on the back of higher government spending, particularly expenditure related to Expo 2020 projects.
The seasonally adjusted Emirates NBD Dubai Economy Tracker Index – a composite indicator designed to give an overview of operating conditions in the non-oil private sector economy – reached 57.6 in May up from 53.9 in April, the fastest pace of growth since April 2017. A reading above 50 indicates expansion and a reading below 50 indicates contraction.
“The sharp rise in the Dubai Economy Tracker index supports our view that growth in Dubai will be faster this year relative to 2017, but the headline reading masks the squeeze on profit margins which is also evident in the survey data,” Khatija Haque, head of Mena Research at Emirates NBD, Dubai’s biggest bank, said on Monday. “Firms, particularly in the wholesale and retail sector, cut prices aggressively to boost their output and new orders last month.”
The wholesale and retail sector led the improvement in May, with the sectoral index reading of 58.3, up from 53.5 in April, followed by travel and tourism with 57.3, up from 55.3. The construction sector was the only one to decline - to 54.6 from 54.9 in April.
The uptick in business conditions in May were driven by higher rates of new output, which increased at the fastest pace in 40 months, and new order growth, which accelerated to a 39-month high thanks to promotional activities and “robust” demand conditions.
New hiring in May grew at a limited pace, with many respondents saying that “employment growth was restricted due to efforts to contain costs”.
For the UAE, the headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index rose to 56.5 in May, from 55.1 in April. The figure was indicative of a “sharp improvement” in UAE business conditions, above the long-run average, the bank said last week.
The UAE PMI has been rising steadily since March, when it hit a 10-month low, declining to 54.8 from 55.1 in February. The May reading was the highest in four months.