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Emirates NBD Dubai Economy Tracker: July's survey marks five-and-a-half years of sustained output growth, but momentum continues to slow

UAE. July’s survey data signalled another increase in overall business activity across Dubai’s private sector economy, which marked five-and-a-half years of continuous expansion.

However, growth momentum moderated to its weakest recorded since March 2012 amid softer contributions from all three key sub-sectors monitored by the survey.

Private sector companies operating in Dubai are nonetheless still highly upbeat about their business activity prospects for the year ahead, according to the latest survey data. This in turn contributed to another rise in employment numbers in July.

Meanwhile, the latest survey suggested that pressure on margins persisted, as input costs increased over the month and average prices charged declined marginally across the private sector.

This release contains the fourth 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 Dubainon-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: “The softening in activity in July is in line with other anecdotal reports, and probably reflects the impact that a stronger dirham and lower oil prices may be having on private sector output and sentiment. Nonetheless at 53.1, the headline number still suggests relatively firm growth in the non-oil economy, and it is especially encouraging that despite the slowdown, firms in all three surveyed sectors remain extremely upbeat about future business activity.”

Key Findings
- Weakest expansion of overall business activity since March 2012
- All three broad sectors recorded slower rates of output growth
- Business optimism remains strong and solid pace of job creation continues in July

Business activity and employment
At 53.1 in July, the seasonally adjusted Emirates NBD Dubai Business Activity Index posted above the 50.0 no-change value, as has been the case in each month since February 2010.

However, the latest reading was down from 55.5 in June, to signal that output growth was the slowest recorded for just under three-and-a-half years and only moderate overall. Construction remained the best performing broad area of activity in July, while travel & tourism and wholesale & retail saw only marginal rises in business activity.

Staff numbers rose across the Dubai private sector as a whole in July, which continued the upward trend seen in each month since January 2012. Although the rate of job creation eased since June, the latest expansion was still the second-fastest seen over the past five months. 

Incoming new work and business activity expectations
July data highlighted a solid upturn in new work received by Dubai private sector companies, led by strong growth in construction and wholesale & retail sectors. That said, the overall pace of new business expansion moderated over the month to its least marked since December 2010. Some survey respondents commented on more cautious spending patterns among clients, although there were also reports that competitive pricing strategies and new marketing initiatives had helped to support new business volumes.

Private sector companies in Dubai retain a strong degree of positive sentiment towards the outlook for business activity over the year ahead, despite the level of confidence moderating from June’s 19-month high. Anecdotal evidence highlighted the launch of new projects at their units and expectations of improved underlying market conditions.

Input costs and average prices charged
Average prices charged by Dubai private sector companies declined for the sixth month running in July, although the latest fall was only marginal and the slowest seen over this period. Reduced charges reflected a combination of competitive pressures and efforts to stimulate demand. Meanwhile, there was a squeeze on operating margins in July as input prices increased at the fastest pace since February. Nonetheless, the rate of cost inflation remained subdued in comparison to the survey’s long-run trend.

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 30th June 2015, total assetswere AED 388.1 Billion, (equivalent to approx. USD 105 Billion).The Group has a leading retail banking franchise in the UAE, with more than 220 branches and over 900 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, 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 approximately4,000 people in 11 countries. Markit shares are listed on Nasdaq under the symbol MRKT.

For more information, please see www.markit.com.

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