Dubai Inc confidence soars
dubai — Business confidence in Dubai recorded an upturn in the second quarter on the back of rising expectations about new projects, orders and hopes for an improvement in market conditions.
The overall business outlook in Dubai also received a boost from projected higher demand due to the festival season and new customers, according to a quarterly business survey conducted by the Department of Economic Development (DED).
The composite Business Confidence Index (BCI) of Dubai firms rose to 117.5 points during the second quarter of 2016, up 7.4 points from the same quarter of 2015 and also higher than the first quarter 2016 index score of 116.5.
The DED survey finds that businesses generally were optimistic on sales and volumes as 44 per cent of those surveyed (500 firms) expected the situation to improve, against 39 per cent in Q1 2016, and another 44 per cent expect stability to prevail. While 48 per cent of the businesses in Dubai expect their sales volume to increase in the third quarter of 2016, 37 per cent anticipate volumes to hold steady.
A comparison of the forecast for third quarter versus that for second quarter shows that all parameters, except the selling prices index, have maintained a steady trend.
The net balance for selling prices has increased from one per cent for the second quarter to five per cent for the third quarter on the back of rising raw material costs and projections of improvement in demand. The net balance for sales volume stands at 33 per cent for the third quarter, higher than the 27 per cent for third quarter of 2015 and 31 per cent for the second quarter of 2016.
Consumers in Dubai were found to be more optimistic on the overall state of the economy and job prospects compared to six other leading cities in the world. In the second quarter, the overall Consumer Confidence Index (CCI) for Dubai stood at 142 points, higher than that of Tokyo, Milan, Paris, New York, Bangkok and London, a study by the DED revealed.
Dubai’s latest score is a significant leap from the CCI score of 138 recorded in Dubai during the last quarter of 2015, the DED said. Dubai also stood out in terms of consumer perception on the overall economy and confidence in personal finance.
In fact, consumer perception on the state of the economy was the brightest in Dubai as 82 per cent termed it as ‘excellent/good,’ whereas New York was in the second spot with 64 per cent voicing a similar sentiment.
According to a recent Emirates NBD survey, new business volumes increased in Dubai for the fourth month running in June, partly driven by greater consumer spending. Dubai’s private sector business activity continued to regain growth momentum in June led by improving business conditions in the travel, tourism, wholesale and retail sectors, the Emirates NBD survey shows.
The latest DED survey shows that confidence on receiving new orders/contracts/projects both from the government and private sector and an increase in demand are the major factors keeping manufacturers buoyant compared to their counterparts in the trading and services sectors. Within the manufacturing sector, furniture and plastics manufacturers hold the strongest outlook for volumes.
The transportation sub-segment of the services sector is the most optimistic for Q3 2016, while the travel and hospitality segment is the least optimistic about their volumes. Within the trading sector, the most optimistic segments are computers, auto, construction materials and food and beverages.
The current survey also shows that large companies continue to be more optimistic compared to SMEs, with composite BCI scores of 121.8 and 111.0 points respectively.
Although marginally less optimistic compared to the overall business community (117.5), exporters are more confident than domestic-market oriented firms with respect to revenues, volumes, profits and purchase orders but are less optimistic about selling prices and employment.
Competition, market conditions, delayed payments and rental/leasing costs were among the main challenges cited by most businesses. The proportion of businesses that intend to invest in capacity expansion and technology upgrades has gone up in Q2 2016 compared to the previous quarter; 69 per cent of the companies plan to invest in expansion of capacity in Q2 2016 versus 61 per cent in Q1 2016 and 65 per cent intend to upgrade technology in Q2 2016 versus 57 per cent in Q1 2016.
With respect to innovation, 88 per cent of the businesses said they have not implemented any type of innovation in their businesses. Of the remaining, 40 per cent indicated that the main purpose for implementing innovation was quality improvement.