Dubai non-oil sector gathers pace in June
Emirates NBD Dubai Economy Tracker Index rises
The improvements in the overall business conditions in Dubai’s non-oil private sector gathered steam in June, with 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 – registering at 56.5, up from May’s seven-month low of 55.
Notably, the latest reading was above the long-run series average (55.2).
By sector, wholesale & retail (index at 58) was the best performing category, closely followed by construction (index at 57.4). The travel and tourism sector (54.4) experienced the slowest improvement in business conditions.
A reading of below 50 indicates that the non-oil private sector economy is generally declining; above 50, that it is generally expanding. A reading of 50 signals no change.
The survey covers the Dubai non-oil private sector economy, with additional sector data published for travel & tourism, wholesale & retail and construction.
"The June Dubai Economy Tracker survey supports our view that Dubai’s economy has grown at a faster rate in H1 2017 compared with the same period last year," said Khatija Haque, the head of Mena research at Emirates NBD. "The wholesale and retail trade sector likely benefited from increased household spending during Ramadan, which was in June this year, while the increased activity in the construction sector probably reflects progress on a number of infrastructure projects in Dubai."
The overall improvement in the health of Dubai’s private sector reflected another sharp rise in business activity. The rate of growth accelerated from May’s seven-month low, and was sharp overall, according to Emirates NBD. The combination of more projects, promotional activities and inflows of new business contributed to greater business activity, according to anecdotal evidence.
Continuing the trend observed during the previous three months, employment rose during June. However, the pace of job creation was marginal overall. An increase in payroll numbers across the wholesale and retail sector offset declines seen in the construction and travel & tourism sectors.
Inflows of new business continued to rise for the sixteenth consecutive month during June. The rate of expansion was faster than May’s seven-month low, matching the trend seen for output. Survey respondents reported that the increase in new orders was supplemented by enhanced marketing and promotional discounting initiatives.
Despite sharper improvements in the health of all three key sub-sectors, business confidence towards the 12-month outlook slowed to the weakest since August 2016. Firms expect greater marketing and sales efforts, combined with improvements in overall business conditions will lead to output growth in the coming 12 months, according to Emirates NBD.
Input price inflation rose from May’s 14-month low to its fastest since March. All three monitored sub-sectors registered a rise in input costs, led by the wholesale and retail sector.
Despite increased inflationary pressures, Dubai’s private sector saw a renewed reduction in output charges, following a fractional rise in May. The only sector to buck the overall downward trend was the construction sector. Firms in the wholesale and retail, and travel and tourism sector reportedly offered discounts to attract customers in response to intensive competitive conditions.
Sources: Emirates NBD, IHS Markit
Updated: July 10, 2017 09:18 AM