Businesses in Dubai expect stability to prevail through second quarter of 2016

Businesses in Dubai expect the market to hold steady through the second quarter of 2016 after the first quarter saw strong performance across the manufacturing, services, transport and construction sectors helping the emirate offset the impact of the slowdown felt across regional markets.

The quarterly business survey conducted by the Department of Economic Development (DED) in Dubai shows 47% of the respondents expecting the situation to remain stable and 39% looking forward to an improvement in the second quarter (Q2) of 2016. Overall 83% of the businesses do not expect any new challenges to their operations, compared to 55% in Q4 2015.

The Composite Business Confidence Index (BCI) for Q1 2016 stands at 116.5 points compared to 116.1 points in the previous quarter (Q4 2015) and larger firms appear more confident than SMEs, with BCI scores of 121.0 and 109.6, respectively.

Expectations on sales revenues, selling prices and volumes are generally lower compared to Q4 2015 but businesses are modestly more optimistic on their Q2 profits. The subdued forecast for selling prices (net balance of 1% for Q2 2016) is also indicative of the low rate of inflation recorded in Dubai (monthly rate of 0.22% in February 2016).

With respect to sales volumes, 45% of the companies anticipate an increase and 14% forecast a decrease. While the manufacturing sector is more optimistic about volumes for Q2 2016, the seasonal decline in economic activity during summer has had its impact on the services sector.

Among the three main sectors (industry, services and trade), the trading sector is the most optimistic on revenues and volumes. The manufacturing sector is the most upbeat on profits and the services sector, on selling prices and hiring. Within services, hotels & restaurants are cautious about sales volumes in Q2 2016 while automobiles and electronics segments are the most optimistic within the trading sector.

The survey for Quarter 1 (January – March) of 2016 was done among 501 companies across Dubai. The participants were asked to indicate if they anticipated an ‘increase’, ‘decrease’ or ‘no change’ on key outlook indicators, including sales revenues, selling prices, volumes sold, profits and number of employees. The survey shows exporters are more confident in terms of volumes though not as optimistic on selling prices and hiring, compared to domestic-market oriented firms. Generally, exporters remain less optimistic than the overall business community does.

The Department of Economic Development commenced the Quarterly Business Surveys to gauge the perceptions of the business community. The survey is done in partnership with the leading global consultancy firm, Dun & Bradstreet (D&B). The survey findings help detect the pulse of the business community whereby government authorities and the private sector can track and analyse major trends and issues concerning businesses in Dubai.

A scientific sampling approach ensured an adequate representation of small, medium and large enterprises and covered the Manufacturing, Trading and Services sectors. In addition, the sample also included export-oriented businesses in Dubai to capture perceptions of the exporting community. The BCI score was calculated factoring in the weighted contribution of SMEs and large firms to the overall GDP of Dubai.