Dubai business conditions brighten
dubai — Dubai’s non-oil private sector gathered steam in June as overall business conditions improved due to strong recovery in retail and construction sectors, latest data shows.
The seasonally adjusted Emirates NBD Dubai Economy Tracker Index — a composite indicator designed to give an accurate overview of operating conditions in the nonoil private sector economy — registered at 56.5, up from May’s sevenmonth low of 55 points. Notably, the latest reading was above the long-run series average of 55.2.
Wholesale and retail index at 58 and construction at 57.4 points led the rebound while the travel and tourism sector at 54.4 experienced the slowest improvement in business conditions, according to the survey which covers the Dubai non-oil private sector economy.
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 June Dubai Economy Tracker survey supports our view that Dubai’s economy has grown at a faster rate in first half of 2017 compared with the same period last year,” Khatija Haque, Head of Mena Research at Emirates NBD, said.
She said the wholesale and retail trade sector likely benefitted from increased household spending during Ramadan, which was in June this year. “The increased activity in the construction sector probably reflects progress on a number of infrastructure projects in Dubai,” Haque said.
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. 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 and tourism sectors.
Inflows of new business continued to rise for the 16th consecutive month during June. The rate of expansion was faster than May’s sevenmonth 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.
No surprise
Atik Munshi, partner at Crowe Horwath UAE, said the month of June was also the month of Ramadan and it is not surprising that ENBD Economy Tracker has seen an upward trend in June compared to the previous month.
“The good news specifically is more towards the construction sector which has seen a positive after witnessing setbacks over the past year. Traditionally the summer months of July and August are slow for the UAE market partly because of the weather and partly because of the non-availability of the key decision makers in these months,” Munshi told Khaleej Times.
“It will not be out of the way if the index shows a downturn in the next two months. Overall the year 2017 is a mixed bag where even from the same sector/industry one can see conflicting results. I see optimism in the market and expect 2017 to be better compared to the previous year,” he added.
Despite sharper improvements in the health of all three key subsectors, 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.
Input price inflation rose from May’s 14-month low to its fastest since March. 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. — muzaffarrizvi@khaleejtimes.com