January data signaled the strongest improvement in non-oil private sector business conditions for nearly two years.
This was highlighted by the seasonally adjusted Emirates NBD Dubai Economy Tracker Index – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy registering 57.1 at the start of the year, up from 55.9 to signal the fastest rate of improvement in 23 months. Furthermore, all the three key sub-sectors monitored by the survey recorded marked rates of expansion.
“The rise in the Dubai Economy Tracker index in January to its highest level in nearly two years was mainly due to faster expansion in output and new orders. While some of the improvement was attributed to new projects, price discounting is still playing a significant part in supporting demand,” said Khatija Haque, Head of MENA Research at Emirates NBD.
By sector, travel & tourism remained the best performing category at the start of the year (index at 57.8), closely followed by wholesale & retail (57.7) and construction (55.4).
The headline Emirates NBD Dubai Economy Tracker Index is derived from individual diffusion indices which measure changes in output, new orders, employment, suppliers’ delivery times and stocks of purchased goods.
A reading of below 50.0 indicates that the non-oil private sector economy is generally declining; above 50.0, that it is generally expanding. A reading of 50.0 signals no change.
The survey covers the Dubai non-oil private sector economy, with additional sector data published for travel & tourism, wholesale & retail and construction.
Business activity and employment
Private sector business activity in Dubai picked up sharply in January, with the pace of growth accelerating to a 23-month high. The latest reading was also stronger than the series average. The wholesale & retail sector signalled the strongest rate of activity growth in seven months, with some firms linking the increase to promotional activities to stimulate client demand. Meanwhile, construction firms widely cited new projects as the principal factor behind the increase in output.
Despite the steep increase in business activity, job creation was modest overall, although the pace of staff hiring picked up slightly since December.
Incoming new work and business activity expectations
Mirroring the trend for business activity, January data signalled greater amounts of new work for the eleventh month in succession. Moreover, the latest increase in new business was the fastest since March 2015. Anecdotal evidence suggested that stronger underlying demand combined with promotional activities supported sales.
Dubai private sector companies remained optimistic about their prospects for activity growth over the next year. Survey respondents commented on new projects and forecasts of improving market conditions.
Input costs and average prices charged
Input cost inflation eased since December and pointed to only a marginal rate of increase. Despite sustained cost pressures, private sector companies discounted their output charges for the sixth consecutive month. Firms in the construction and wholesale & retail sectors reported that intense market competition had left them unable to pass on higher cost burdens to clients. Meanwhile, travel & tourism bucked the overall trend, and raised their average selling prices at a marked rate amid strong underlying demand conditions.
