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Business activity growth in Dubai's private sector strengthens, as new business expands at fastest rate since March

UAE.  Latest business survey data pointed to a robust and accelerated expansion in Dubai’s private sector output during August. Furthermore, the rate of business activity growth was the fastest seen since May, with all three monitored sub-sectors reporting stronger output growth in the latest survey period.

The rebound in activity growth was underpinned by a stronger expansion in new business, which increased at the strongest rate in five months.

Despite stronger growth in activity and new orders, confidence towards the 12-month business outlook moderated for the second month in a row in August, while the rate of job creation was little-changed from July.

On the prices front, input cost inflation across Dubai’s private sector strengthened to a six-month high, but selling prices declined slightly.

This news release contains the fifth 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:  “The rise in business activity in August is encouraging, and suggests that at least some of the slowdown over the previous two months was due to Ramadan.

“Business optimism about future growth remains high, but has moderated since the Q2, with the sharp decline in oil prices since June likely weighing on sentiment. Year-to-date, the Dubai Economy Tracker suggests that the pace of growth in Dubai has been robust, although somewhat slower than in 2014, with the output index averaging 59.1 in January through August, compared with 62.1 over the same period last year.”

Key Findings
⦁ Business activity growth rebounds from July’s 40-month low
⦁ All three key sub-sectors report faster expansions of output
⦁ Confidence towards the business outlook edges down in August

Business activity and employment
The seasonally adjusted Emirates NBD Dubai Business Activity Index registered at 57.6 in August, up from July’s recent low of 53.1, and above the neutral 50.0 value for the sixty-seventh month in a row.

Moreover, the latest reading pointed to the fastest expansion of output since May. Stronger increases in output were recorded across all three key sub-sectors in August. The steepest rate of growth was seen at construction companies, followed by wholesale & retail firms, with rates of expansion quickening to three-month highs in both cases. While output growth also quickened across travel & tourism sector, the rate of increase was only modest overall.

August data pointed to a sustained and strong upturn in Dubai private sector employment. The rate of growth was up only slightly from the previous month, however, and was slower than June’s recent peak.

Incoming new work and business activity expectations
Dubai private sector businesses saw a further increase in total new business during August, with the rate of expansion improving since July’s recent low to a five-month high. Panel reports suggested that improved market conditions and a general upturn in client demand had boosted new work intakes over the month, while some firms commented that the use of promotional discounts had helped them to secure new business.

Latest survey data indicated that Dubai private sector firms remained optimistic towards the 12-month business outlook in August. That said, the degree of positive sentiment moderated further from June’s recent high to its lowest level in three months.

Input costs and average prices charged
Private sector companies operating in Dubai continued to discount their selling prices in August. Though only moderate, the rate of reduction was one of the fastest seen in the current seven-month sequence of decline.

Some firms commented that increased market competition had led them to discount their charges. In contrast, average input costs continued to increase across Dubai’s private sector economy in August, indicating a further squeeze on operating margins. Furthermore, the rate of cost inflation was the fastest since February and solid overall.

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 30th June 2015, total assets were 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 approximately 4,000 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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