The Dubai Economy Tracker Index (DET) declined to 50.7 in January, signaling the slowest expansion in non-oil private sector activity in nearly six years.
January data indicated a continued slowdown in the overall performance of Dubai’s private sector economy, with the headline seasonally adjusted Emirates NBD Dubai Economy Tracker Index registering 50.7, down from 51.8 in December.
Although still above the 50.0 no-change mark, the latest reading of the index that is designed to give an accurate overview of operating conditions in the non-oil private sector economy pointed to the weakest overall expansion since February 2010.
Both output and new orders growth were weaker in January, while employment growth was only marginal. Input costs fell for the first time since June 2010, as firms took advantage of weak demand conditions to negotiate better prices with suppliers. Output prices also declined, with firms citing strong competition for new work resulting in promotional discounting. Despite the relatively weak activity data, business expectations held up in January, with this index rising to 56.6 in January from 56.4 in December.
By sector, wholesale and retail was the best performing category, with overall business conditions improving at a slightly faster pace than in December. Meanwhile, construction companies experienced a deterioration in operating conditions for the first time since this index began in March 2015.
The headline index is derived from individual diffusion indices which measure changes in output, new orders, employment, suppliers’ delivery times and stocks of purchased goods.
“The Dubai Economy Tracker survey shows the services sectors continuing to face challenging market conditions at the start of this year, while construction sector activity has also slowed sharply. Weak external demand was evident in the main UAE Purchasing Managers Index survey for January, and this likely weighed particularly heavily on Dubai’s open, export oriented economy, ” said Khatija Haque, Head of MENA Research at Emirates NBD.
The construction sector index fell below the neutral 50.0 level in January, to 49.2, indicating outright contraction in the sector after relatively robust growth for most of 2015. Both output and new work declined last month, after posting relatively good readings in December. Uncertainty about the economic outlook against the backdrop of a new multiyear low in oil prices in January likely weighed on sentiment and some respondents indicated this had led to delays to new projects last month.
On the back of weaker client demand, business expectations moderated, with this index falling to 53.9 in January from 62.2 in December. Employment growth in the sector was slower in January and stocks of purchases declined.
The overall travel and tourism index eased to 51.1 in January from 53.3 in December, indicating slower activity growth in the sector last month. The output index declined to 51.7, while the new work index fell to 53.4 in January from 56.2 in December. However, employment growth was slightly faster in January compared with the previous month.
“Weak external demand was evident in the main UAE Purchasing Managers Index survey for January, and this likely weighed particularly heavily on Dubai’s open, export oriented economy,” said Haque.
Wholesale and retail trade sector benefits from Dubai Shopping Festival (DSF) The wholesale and retail trade sector index rose to 51.5 in January from 50.6 in December, showing a slightly faster pace of expansion.
The rise in output was more modest however, with the output index at 51.0 in January. Jobs growth was slightly firmer on the back of increased new work, and firms were much more optimistic about future prospects, with the business expectations index rising to 59.2 last month from 53.1 in December.
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Looking ahead, private sector firms remain positive about the 12-month business outlook, but the degree of confidence was up only slightly from December’s survey-record low. By sector, weaker optimism among construction and travel and tourism firms contrasted with an upturn in growth expectations across the wholesale and retail sector.
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