Dubai business growth slowest since 2012: report

The Dubai Economy Tracker data for July showed sustained increase in business activity and private sector output growth supporting five-and-a-half years of continuous expansion.

The tracker data from a monthly survey of business conditions in the Dubai's non-oil private sector, sponsored by Emirates NBD and produced by Markit, gives an early indication of operating conditions in Dubai.

Although the output growth continued to be positive, growth momentum moderated to its weakest recorded since March 2012 amid softer contributions from all three key sub-sectors monitored by the survey.

"The softening in activity in July is in line with other anecdotal reports, and probably reflects the impact that a stronger dirham and lower oil prices may be having on private sector output and sentiment. Nonetheless at 53.1, the headline number still suggests relatively firm growth in the non-oil economy, and it is especially encouraging that despite the slowdown, firms in all three surveyed sectors remain extremely upbeat about future business activity," said Tim Fox, Chief Economist at Emirates NBD

Survey results showed private sector companies operating in Dubai are highly upbeat about their business activity prospects for the year ahead. This in turn contributed to another rise in employment numbers in July. Meanwhile, the latest survey suggested that pressure on margins persisted, as input costs increased over the month and average prices charged declined marginally across the private sector.

"The rate of job creation across Dubai's private sector economy remains relatively buoyant. The whole economy employment index was 53.3 in July, which is slightly below June's reading of 54.2, but still represents the second-fastest rate of payrolls growth in the past five months. New Orders growth also moderated in July, which panelists attributed to more cautious spending patterns among clients," said Jean-Paul Pigat, Senior Economist at Emirates NBD

For the sixth consecutive month, firms reduced their selling prices due to competitive pressures and attempts to stimulate demand. Indeed, in July the Prices Charged index hit 49.5, up marginally from 49 and 48 in June and May respectively. At the same time, input prices increased at the fastest pace since February (52.9), suggesting that margins remain under pressure.

Activity across the wholesale and retail trade sector expanded, but at a slightly weaker pace relative to June. The output index hit 51.7 (compared to 54.9 the prior month), with both the employment and new work indices remaining broadly stable at 53.4 and 55.2 respectively. Respondents attributed the rise in new business volumes to competitive pricing strategies.

After peaking at 77 in June, the business expectations index dipped in July, however at 70.7, it is clear there is still a significant degree of optimism about the outlook for this industry.

Activity within the travel and tourism industry posted the sharpest drop in July relative to June, however still showed a slight degree of expansion. The Output index fell to 50.5, compared to 55.3 in the prior month, while the Employment and New Work indices both registered readings of 52.6. The seasonally adjusted Input Cost Index rose to its highest level in the fivemonth time series (53.1), which was attributed to increased purchase prices and salary costs.