Ongoing projects boost Dubai’s private sector

NEW ORDER GROWTH SLOWED IN AUGUST, WITH STAFFING UNCHANGED

The non-oil private sector in Dubai reported modest growth in output in August with the headline Dubai Economy Tracker Index (DET) gaining marginally to 55.2 from 54.9 in July.

Overall output rose at a faster rate than in July, driven by ongoing projects, but new order growth slowed last month.

The employment index eased to 50.4 in August, only slightly above the ‘no change’ level.

The vast majority of firms surveyed (94 per cent) reported no change in staffing levels in August.

“The average DET year to date is 55.6, only slightly lower than the same period last year [56.5]. This suggests to us that Dubai’s economy is probably growing a similar rate to 2017, or a touch slower. Preliminary estimates from the Dubai Statistics Centre put last year’s GDP growth at 2.8 per cent; about half a percentage point slower than our forecast for 2018,” Khatija Haque, Head of Mena Research at Emirates NBD.

Producer price pressures eased in August, with the input cost index falling to just 51 from nearly 54 in July. However, average selling prices declined a fraction with some firms citing promotional activity. The selling prices has been in contraction for the last four months running, highlighting the lack of pricing power of firms and the competitive market environment.

The DET survey covers the Dubai non-oil private sector economy, with additional sector data published for travel and tourism, wholesale and retail and construction. At the sector level, wholesale and retail was the strongest performer at 56.5 in August, followed by construction (55.3) and travel and tourism (52.9).

The construction sector index declined in August, signalling a slower rate of growth than in the prior two months. Output (60.7) continued to rise at a sharp rate, with nearly 40 per cent of firms surveyed reporting higher output than in July.

However, new work growth slowed last month. Business optimism in the sector was much higher than in July, with more than 80 per cent of firms surveyed expecting their output to be higher in a year’s time.

Wholesale and retail trade sector index was flat in August at 56.5. Employment remained close the no-change level of 50 where it has been for most of this year.

Firms reported very little change in input costs in August, although selling prices declined slightly on average, marking the fourth month in a row of lower selling prices.

The travel and tourism sector index fell to 52.9 in August, a new 2018 low, as most of the key sub-indices declined last month. The employment index was fractionally below the neutral 50-level, with the vast majority of firms surveyed reporting no change in staffing last month.

Overall, business activity expectations ticked up in the latest survey. In fact, the degree of optimism among the strongest seen in the past six-and-a-half years. According to anecdotal evidence, Expo 2020 is expected to stimulate growth across the private sector economy.