DUBAI: Dubai’s private sector recorded a robust improvement in overall business conditions during May with the fastest rise since March 2015, according to the Emirates NBD Dubai Economy Tracker Index. At 54.5, up from 52.7 in April, the seasonally adjusted Index has now posted above the crucial 50.0 no-change value in each of the past three months.
The headline index – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – was much stronger than the survey-record low seen in February (48.9) and indicated the steepest improvement in business conditions since August 2015.
Wholesale & retail remained the best performing of the three key sub-sectors monitored by the survey in May (index at 56.4), closely followed by construction (55.5). Travel & tourism also recorded an overall upturn in business conditions (51.8), but the pace of improvement eased to a three-month low in May. 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.
Khatija Haque, head of MENA Research at Emirates NBD, said: “The improvement in the Dubai Economy Tracker in May was due mostly to strong growth in output and new work, which is encouraging as it suggests that demand remains robust. Margins are still being squeezed as firms reduce prices to secure new work, but business optimism remains high.”
May data signalled a rise in business activity for the third month running, which firms linked to new sales wins, greater confidence among clients and successful marketing strategies. The latest expansion of private sector output was the fastest since March 2015 and above the average since the survey began in 2010. Steeper growth of wholesale & retail and construction activity helped to offset a slight slowdown across the travel & tourism sector.
Increased staffing levels were recorded across the private sector in May, which continued the upward trend seen in each month since December 2011. A robust and accelerated improvement in new order books helped to underpin the overall recovery in business conditions during May. The latest rise in new work was the steepest since September 2015, which firms attributed to a greater willingness to spend among clients and, in some cases, successful price discounting strategies to generate new sales.
Private sector companies remain upbeat about their growth prospects for the next 12 months, and the degree of positive sentiment picked up slightly since April. Construction firms were the most optimistic in May, with survey respondents citing new development projects and opportunities related to Expo 2020 in particular.
Average cost burdens increased at a moderate pace in May, although the latest rise was the fastest since August 2015. Survey respondents pointed to a combination of higher raw materials costs and greater staff salaries. Meanwhile, prices charged by private sector firms were reduced for the fifth month running, which was linked to ongoing discount strategies and strong competition for new work.
