Dubai construction firms bullish on the year ahead

The data continued to point to subdued cost pressures in Dubai’s construction sector. The seasonally-adjusted Input Costs Index rose from January’s seven-month low of 51.0 to 51.8, but still signalled a weaker rate of inflation than the long-run series average.

According to analysts, with the deadline for completion of several projects before Expo 2020 Dubai looming, construction activity is set to pick up.

Total business activity in Dubai rose at the fastest rate in nine months, while new business increased at a pace that remained above the 2018 average despite easing since January. Employment, however, fell at the fastest rate since the survey began in 2010. The seasonally-adjusted Emirates NBD Dubai Economy Tracker Index was unchanged from January’s sevenmonth high of 55.8 in February, signalling a strong improvement in business conditions that was faster than the trend for 2018.

While companies in the wholesale and retail sector reported the firmest volume growth in February — although with greater price discounting than in January — travel and tourism firms in Dubai remained strongly optimistic regarding activity levels over the next 12 months in February. The headline index for the wholesale and retail sector rose to an eightmonth high of 58.1, above the comparable figure for the travel and tourism sector (56.8, a ninemonth high). The third key sector monitored — construction — also registered a stronger performance in February (54.0).

Khatija Haque, head of Mena research at Emirates NBD, said the growth in the volume of output and new work has been underpinned by continued price discounting, particularly in the wholesale and retail trade sector.

“Firms’ margins continue to be squeezed as selling prices have declined on average for the last 10 months, while input costs have increased over the same period. As a result, rising new orders have not translated into increased hiring and job growth in the private sector. Indeed, employment declined at the fastest rate on record in February.”

The report said the data signalled a rise in business activity in the non-oil private sector. Moreover, the rate of expansion accelerated to the fastest since May 2018. Wholesale and retail posted the strongest growth among the three key sectors.

“However, the rate of contraction in workforces was the strongest registered since the series began in January 2010, despite faster activity growth,” it said.