Dubai’s non-oil growth strengthens at start of 2019
Emirates NBD Dubai Economy Tracker has shown that that the overall growth of Dubai’s non-oil private sector economy quickened in January. Moreover, firms were at their most optimistic regarding future growth prospects since at least 2012. Total activity and new business both rose at marked rates despite only a slight increase in employment, suggesting companies were focusing on efforts to boost productivity.
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 – improved to 55.8 in January, from 53.7 in December. The latest figure signalled the strongest overall improvement in the business climate since last June. It was above both the trends for 2018 as a whole (55.0) and the long-run series history (55.2, since January 2010).
Of the three key sectors monitored, wholesale & retail (56.3) posted the strongest overall improvement in business conditions at the start of 2018, followed by travel & tourism (54.1). The headline index for the construction industry posted 53.8, little-changed from December’s nine-month low but still signalling solid overall growth.
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.
Commenting on the Emirates NBD Dubai Economy Tracker, Khatija Haque, Head of MENA Research at Emirates NBD, said, "The Dubai Economy Tracker has started the year on a positive footing, climbing from 53.7 in December to 55.8 in January, the highest level in seven months. This marks a recovery from the weak growth in Q4 2018 – the slowest expansion in the non-oil private sector since Q1 2016 – and reaffirms our view that the Dubai economy will strengthen in 2019, owing to greater government spending and ongoing Expo preparations. This optimism is shared by survey respondents, which despite ongoing pressure on them, overwhelmingly expect that output will be higher in 12 months’ time. The business optimism index rose to a series high in January.
"Both output and new orders improved in January, contributing to the strong headline reading. However, this continues to come at a cost to firms’ margins, as output prices contracted for the ninth consecutive month, albeit at a slower pace than seen in the last quarter. Some relief to companies came from a moderately more sedate growth in input prices, but the squeeze to margins remains evident in firms’ efforts to cut costs through curbing headcount – employment was positive, but only marginally.
"The outperformer of the three sectors individually measured in the survey was wholesale and retail, which rose to the highest level since August 2018, but construction and travel and tourism both also saw improvements on recent months."
Total non-oil private sector business activity in Dubai rose at a faster pace in January. Growth was in line with that seen over 2018 as a whole, and stronger than the long-run average. Construction posted the fastest output expansion of the three monitored sectors.
Employment continued to rise at a marginal pace in January. By sector, staffing contracted in travel & tourism, while construction registered a stronger rate of job creation than wholesale & retail.
Higher intakes of new business supported overall conditions in the non-oil private sector in January. The current sequence of expansion in new contracts now stretches to nearly three years, and the latest increase was the fastest since last June.
Stronger new business growth in January lifted firms’ expectations for total activity to a survey record high. Sentiment strengthened in all three sectors, with both wholesale & retail and construction posting record high index scores.
Average input prices in the non-oil private sector economy rose for the tenth month running in January, but the rate of inflation remained moderate. The weakest cost pressures were signalled in the travel & tourism sector. Meanwhile, charges levied for final goods and services fell for the ninth month running, albeit at the slowest rate since last August. Of the three key monitored sectors, however, only wholesale & retail posted lower sales prices.