UAE. Dubai private sector companies indicated a modest rebound in output growth from the 18-month low recorded during April, according to the latest Emirates NBD Dubai Economy Tracker™ report.
The latest survey also pointed to a slightly faster expansion of incoming new work, while modest job creation and positive sentiment regarding the business outlook was sustained.
Of the three key sub-sectors monitored by the survey, construction was the best performing in terms of output and employment growth, largely reflecting a sharp and accelerated increase in new development projects.
This article contains the second release of data collected from a new monthly survey of business conditions in the Dubai non-oil private sector. Sponsored by Emirates NBD and produced by Markit, the survey provides an early indication of operating conditions in Dubai.
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, Tim Fox, Chief Economist at Emirates NBD, said: “May’s improvement in the Dubai Economy Tracker is very encouraging as it illustrates the resilience of the Dubai economy in the face of ongoing headwinds such as the strong dollar.
“To our mind it appears to be consistent with other tentative signals that suggest that Q1 may have been the low point for growth during the year. However, it is clear that businesses remain concerned about the outlook and with US interest rates likely to rise in H2 there is some basis for confidence to be guarded.”
Key Findings
Business activity growth picks up for the first time since January…
…helped by faster rises in construction and travel & tourism activity
New work also expands at sharper pace, but is still the second-slowest since March 2012
Business activity and employment
At 57.6 in May, the seasonally adjusted Emirates NBD Dubai Business Activity Index picked up slightly from 57.2 in April and remained well above the 50.0 threshold that separates growth from contraction. The latest reading was exactly in line with the average since the series began in 2010, but this still signalled a slower growth path than the peak seen at the start of this year.
By sub-sector, construction remained a key engine of output growth, with the respective index at 62.7, up sharply from 59.6 in April. Wholesale & retail experienced a moderation in activity growth (index down to 56.5, from 58.4), while travel & tourism under-performed to a lesser extent in May (index up to 54.1, from 52.3 in April).
Sustained business activity growth contributed to a moderate increase in private sector employment during May. Net job creation has now been recorded for almost three-and-a-half years, although the pace of staff hiring remained slightly weaker than the average seen over this period.
Emirates NBD Dubai Economy Tracker™
Sources: Emirates NBD, Markit
Incoming new work and business activity expectations
May’s survey highlighted a slight acceleration in new business growth from the 37-month low recorded in April. However, the latest expansion was still the second-weakest over this period. Survey respondents commented on intense competition for new work and a more subdued appetite for spending among clients. The main exception was the construction sector, where new work increased at a sharp and accelerated pace.
With new business growth remaining well below the trends seen during much of the past three years, Dubai private sector companies indicated greater caution about their prospects for activity growth over the year ahead.
Although still indicative of strong overall confidence, the degree of positive sentiment towards future business activity was the least optimistic since this index began in early-2012. Moreover, business confidence moderated in all three key sectors monitored by the survey in May.
Input costs and average prices charged
On the prices front, the latest survey pointed to only a marginal rise in average cost burdens. Nonetheless, the rate of inflation picked up slightly to its fastest for three months, with construction sector costs increasing at a particularly marked pace.
Meanwhile, strong competition for new work encouraged firms to reduce their output charges in May. Although only modest, the overall rate of price discounting was the sharpest recorded for just over two years, led by the travel & tourism sector.
Emirates NBD Dubai Economy Tracker: Sector summary
Sources: Emirates NBD, Markit
The next Dubai Economy Tracker Report will be published on 9th July 2015 at 09:15 (DUBAI)
Photo Caption: Tim Fox, Chief Economist at Emirates NBD
About The Emirates NBD Dubai Economy Tracker™
The Emirates NBD Dubai Economy Tracker™, produced by Markit, is based on data compiled from monthly replies to questionnaires sent to senior executives in approximately 600 private sector companies, which have been carefully selected to accurately represent the true structure of the Dubai economy, including manufacturing, services, construction and retail.
The panel is stratified by Standard Industrial Classification (SIC) group, based on industry contribution to GDP. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month.
For each of the indicators the ‘Economy Tracker report’ shows the ‘diffusion’ index. This index is the sum of the positive responses plus a half of those responding ‘the same’. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change.
An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease. Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.
About Emirates NBD
Emirates NBD is a leading banking Group in the region. As at 31st March 2015, total assets were AED 367.5 billion, (equivalent to USD 100). The Group has a leading retail banking franchise in the UAE, with more than 215 branches and over 889 ATMs and CDMs in the UAE and overseas. It is a major player in the UAE corporate and retail banking arena and has strong Islamic banking, Global Markets & Treasury, Investment Banking, Private Banking, Asset Management and Brokerage operations.
The Group has operations in the UAE, Egypt, the Kingdom of Saudi Arabia, Qatar, Singapore, the United Kingdom and representative offices in India, China and Indonesia.
The Group is an active participant and supporter of the UAE’s main development initiatives and of the various educational, environmental, cultural, charity and community welfare establishments.
About Markit
Markit is a leading global diversified provider of financial information services. We provide products that enhance transparency, reduce risk and improve operational efficiency. Our customers include banks, hedge funds, asset managers, central banks, regulators, auditors, fund administrators and insurance companies. Founded in 2003, we employ over 3,500 people in 10 countries. Markit shares are listed on Nasdaq under the symbol MRKT.
For more information, please see www.markit.com
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