Dubai’s non-oil economy growing at a ‘similar rate to 2017, or a touch slower’

Dubai’s non-oil private sector posted slight growth in August compared with July, although both the travel and tourism and construction sectors saw softer growth during the month, according to the latest monthly survey by Emirates NBD.

The seasonally adjusted Dubai Economy Tracker Index (DET) stood at 55.2 in August, up from 54.9 in July. At the sector level, wholesale and retail was the strongest performer at 56.5 in August, followed by construction (55.3) and travel and tourism (52.9).

Khatija Haque, head of MENA Research at Emirates NBD, said: “The average DET year to date is 55.6, only slightly lower than the same period last year (56.5). This suggests to us that Dubai’s economy is probably growing a similar rate to 2017, or a touch slower. Preliminary estimates from the Dubai Statistics Centre put last year’s GDP growth at 2.8 per cent; about half a percentage point slower than our forecast for 2018.”

Business activity increased once again in Dubai’s non-oil private sector, continuing the sequence of expansion recorded since March 2016, the report found. The rate of growth was above the historical average and the sharpest seen in three months. Some firms linked improving output to ongoing projects.

However, inflows of new business increased at the slowest pace since April, the report found. Firms that saw new business growth linked it to promotional activity and marketing campaigns.

Meanwhile average cost burdens faced by private sector companies in Dubai increased for the fifth month running in August.

The rate of inflation eased since July, however, and was only marginal overall, the survey found.

Promotional activity led to lower average selling prices in August, but the rate of price discounting softened from July.

In terms of job creation, the survey found that it had slowed since July and was only fractional overall. The employment index eased to 50.4 in August, only slightly above the ‘no change’ level. The vast majority of firms surveyed (94 per cent) reported no change in staffing levels in August.

However, the slight increase extended the current sequence of expansion to five months. Firms that reported higher payroll figures linked the rise to higher output requirements.

Also read: UAE non-oil sector employment declines for first time since 2009

“Output rose at a faster rate than in July, driven by ongoing projects, but new order growth slowed modestly last month,” said Khatija Haque.

“Producer price pressures eased in August, with the input cost index falling to just 51.0 from nearly 54 in July. However, average selling prices declined a fraction with some firms citing promotional activity. The selling price index has been in contraction territory for the last four months running, highlighting the lack of pricing power of firms and the competitive market environment.”

The report also found that business activity expectations rose in the latest survey with the degree of optimism was “among the strongest seen in the past six-and-a-half years”.

According to anecdotal evidence, Expo 2020 is expected to stimulate growth across the private sector economy.