Emirates NBD Dubai Economy Tracker

A new survey from Emirates NBD highlights that April was a positive month overall for the Dubai private sector economy, with output and new business volumes continuing to expand at robust rates. However, there were signs that growth momentum has slowed from its peak seen at the start of 2015. Of the three key sub-sectors monitored by the survey, the fastest pace of output expansion was recorded in construction. Looking ahead, travel & tourism companies are the most optimistic about the year-ahead business outlook.

The survey, sponsored by Emirates NBD and produced by Markit, contains original data collected from a new monthly survey of business conditions in the Dubai non-oil private sector. The survey covers the Dubai non-oil private sector economy, with additional sector data published for travel & tourism, wholesale & retail and construction.

Commenting on the Emirates NBD Dubai Economy Tracker, Khatija Haque, Head of MENA Research at Emirates NBD, said:

The Dubai Economy Tracker provides additional evidence that suggests a slowing in the Dubai economy since the start of this year, in line with the overall UAE Purchasing Managers Index. However, the slowdown is from a very high base with key readings still clearly in expansion territory, well above the neutral 50.0 reading.
In particular activity in the construction and retail & wholesale trade sectors was very strong in April, with output readings of 59.6 and 58.4 respectively. The travel & tourism sector showed slower growth, however, with its output index at just 52.3. This is unsurprising as the sector feels the impact of a stronger USD on demand from key emerging markets. Nevertheless, optimism about future activity remains high.
Key Findings
Dubai private sector output growth eases further from Januarys peak
Construction was the best performing sub-sector in terms of business activity expansion
Input cost inflation remains close to the lowest recorded over the past five years
The latest increase in new business volumes was the weakest for just over three years, which in turn put the brakes on output growth in April. In response to slower growth and greater uncertainty towards the business outlook, a number of firms reined in their job hiring during the latest survey period. Meanwhile, input cost inflation remained very subdued, and strong competition for new work contributed to a fractional decline in average prices charged by private sector companies.
Emirates NBD Dubai Economy Tracker

Sources: Emirates NBD, Markit

Business activity and employment
The seasonally adjusted Emirates NBD Dubai Business Activity Index posted 57.2 in April, down from 60.6 in March but still well above the 50.0 mark that separates expansion from contraction. The latest reading pointed to a strong expansion of business activity, but the index was still the lowest since October 2013. By sector, the greatest slowdown was seen in travel & tourism (index fell to 52.3 in April), while construction (59.6) and wholesale & retail (58.4) were the best performing categories monitored by the survey.

Staff hiring patterns also slowed across the Dubai private sector, with the latest increase in employment the least marked since August 2013. Jobs growth moderated in all three sub-sectors tracked by the survey.

Incoming new work and business activity expectations
Softer new business gains were the main reason for the moderation in output growth and job hiring across the Dubai private sector in April. A number of survey respondents cited greater risk aversion among clients, despite improving underlying market conditions. Wholesale & retail was the only sub-sector to avoid the wider slowdown in new business growth.

Looking ahead, Dubai private sector companies are highly optimistic about their prospects for growth. Around ten times as many firms (38%) forecast a rise in output over the next 12 months as those that anticipate a decline (4%). All three key sectors are confident, led by travel & tourism where 42% expect an increase and less than 2% a fall. Reasons cited for confidence included greater marketing and promotional budgets, positive market developments ahead of Expo 2020 and strong underlying economic conditions.

Input costs and average prices charged
The latest data highlighted positive news on the inflation front, with overall input price inflation little-changed from the near five-year low seen in March. Both purchasing prices and salary pressures were only marginal during April.

Average prices charged by Dubai private sector firms decreased fractionally in April, with lower tariffs seen in all three sub-categories monitored by the survey. Reports from survey respondents suggested that intense competition for new work, low cost pressures and efforts to increase market share had all contributed to price discounting strategies.
Emirates NBD Dubai Economy Tracker: Sector summary

Sources: Emirates NBD, Markit
-Ends-
The next Dubai Economy Tracker Report will be published on 9th June 2015 at 09:15 (DUBAI)