Business confidence in Dubai on the rise as Expo 2020 drives hopes of renewed demand

Composite business confidence index shows year-on-year increase of 22.4 points in Q1 2014

The Dubai business community has been significantly more optimistic during the first quarter of 2014, compared to the same period of the previous year. Optimism is especially high among manufacturing and services firms, according to the quarterly business survey conducted by the Department of Economic Development.

The composite Business Confidence Index for Dubai stood at 135.5 points in Q1 2014, an increase of 22.4 points from Q1 2013. New projects expected as a result of World Expo 2020 are driving positive perceptions.

• Read more: Dubai Expo 2020 Master Plan Development Update Outlined

Following on from the previous quarter large companies continue to have a stronger outlook compared to small and medium firms, as indicated by their corresponding index scores of 141.6 and 126.4, respectively. Large companies are more optimistic than SMEs on all the parameters recorded in the survey.

From a sectoral perspective, optimism with respect to selling prices, volumes and new purchase orders is the highest within the manufacturing sector, while optimism on hiring plans and net profits is the highest amongst service firms.

Selling prices are largely expected to be stable, with 73 per cent of the respondents expecting “no change” while seven per cent expect a decline due to stiff competition in the market as well as the effect of seasonal downturn associated with the second quarter.

With prices largely expected to remain stable, the revenue increase estimates are largely driven by an expected increase in volumes. Respondents forecasting an increase in sales volumes during Q2 2014 accounted for 63 per cent as against 54 per cent in the previous year.

In line with the expectations for sales volumes, 62 per cent of the respondents forecast an increase in new purchase orders in Q2, 2014. With respect to net profits, 54 per cent are expecting an increase on the back of improvement in demand for their products, whereas 10 per cent foresee a decline citing slowdown in business conditions and a decline in demand.

The businesses surveyed are more confident on hiring as compared to the same period last year but less confident compared to the previous quarter – 30 per cent intend to increase their staff count in Q2 2014 compared to 23 per cent in Q2 2013 and 39 per cent in Q1 2014.

The manufacturing sector retains its lead with respect to expectations in terms of volumes sold, with 69 per cent firms expecting an increase in sales volumes in the next quarter.

Within the services sector, firms in the construction, architecture and real estate sub-segment are extremely confident with respect to volumes of sales in Q2 2014. On the other hand, expectations are subdued in the hotels and restaurants segment, mainly due to the impact of summer on tourist inflows and events.

Transportation firms maintain a strong outlook, with 65 per cent looking forward to better volumes accentuated by a growing population, rising construction activity, increasing trade (exports and imports) and a booming economy. Within the trading sector, building & construction, food & beverages, electronics and auto spare parts firms are particularly optimistic due to new contracts expected in the coming quarter.

DED conducts the quarterly surveys as an effective tool to measure the pulse of the business community and allow the government and the private sector to track and analyse major trends and issues that have a bearing on economic activity in Dubai.

A total of 502 companies in Dubai were covered in the Q1 2014 survey. The companies were asked to indicate if they anticipated an ‘increase,’ ‘decrease,’ or ‘no change’ in key indicators such as sales revenues, selling prices, volumes sold, profits and number of employees.

Conducted in collaboration with the global consultancy firm Dun & Bradstreet (D&B), the quarterly survey uses a rigorous sampling approach that ensures adequate representation of small, medium, and large enterprises across the manufacturing, trading, and services sectors, while giving due attention to the perceptions of the exporting firms in Dubai.