Dubai’s non-oil private sector growth eases

MARGIN PRESSURES, COST CONTROLS HIT JOB GROWTH

Non-oil private sector growth in Dubai eased in December with the headline Dubai Economy Tracker Index (DET) declining to 53.7 in December, from 55.3 in November.

The average DET reading for the fourth quarter of 2018 was 53.8, the lowest since the first quarter of 2016.

“All three of the individual sectors tracked in the index expanded at a slower pace in December, compared to November, with the construction sector slowing from the particularly strong 57.5 seen last month to 53.7 in the latest print. Travel and tourism remained the underperformer, falling from 52.8 to 52.0, compared to wholesale and retail trade’s 54.2,” said Khatija Haque, head of Mena Research at Emirates NBD.

Average input prices in the non-oil private sector rose only modestly in December, with the rate of inflation at a four-month low and below the long-run series average.

With costs rising at a subdued overall rate, private sector companies cut their charges for goods and services for the eighth month in December.

While private sector firms reported solid increases in output in December, and for the year as a whole, this has come on the back of consistent and continued The Dubai Economy Tracker index data suggests that Dubai’s economy grew at roughly the same rate in 2018 as in 2017. “Preliminary official estimates put GDP growth at 2.8 per cent in 2017 and we have pencilled in the same for 2018. This is slower than we had anticipated at the start of last year. We do expect GDP growth to accelerate in 2019 however, as government spending is likely to rise and as the bulk of Expo 2020 projects near completion,” said Khatija Haque, head of Mena Research at Emirates NBD. price discounting in a very competitive environment, despite rising input costs.

All three of the key monitored sectors — construction, wholesale and retail, and travel and tourism — registered slower improvements in business conditions in December.

Weakest expansion

The construction sector index declined to 53.7 in December from 57.5 in November, signalling the weakest expansion in the sector since March 2018.

Output increased sharply, but at a slower rate than in November while new order growth was the weakest since March. The slowdown in new work came despite deeper discounts on prices charged.

The wholesale and retail trade sector index slipped to 54.2 in December from 55.4, as both output and new work increased at a slower rate.

The average prices charged index stood at 48.2, similar to 2017 but better than the average for 2016 which reflected even deeper price cuts. Employment in the sector was also weaker than in 2016 and 2017.

The travel and tourism index declined to 52 in December 2018, ending the worst performance for the sector (in terms of survey data) since the first quarter of 2016. The average index reading was 51.5 in the fourth quarter of 2018, much lower than the 2018 first quarter reading of 56.5.

The pressure on firms’ margins and efforts to find costs savings is reflected in almost no job growth in Dubai’s private sector last year: the employment index averaged 50.2, the lowest in the survey’s eight-year history.

Despite the softness in the December survey, firms were still optimistic about their future prospects with 64 per cent believing their output would be higher in a year’s time, while just 5.3 per cent expected further weakness. However, the degree of optimism was the weakest since July 2018.