Dubai’s private sector growth eases to seven-month low

Business conditions in Dubai’s private non-oil sector slowed down, with growth easing to a seven-month low, according to the monthly index from Emirates NBD.

Although output and new orders expanded, the seasonally adjusted Emirates NBD Dubai Economy Tracker Index fell from April’s 26-month high of 57.7 to 55 in May.

The latest reading signalled the slowest pace of improvement seen in seven months.

Emirates NBD’s monthly index for the UAE also found that private sector growth across the country dropped to a six month low in May, as expansion in output and new orders slowed.

Read more: UAE private sector growth falls to six month low

“Although the overall pace of activity growth slowed to the weakest in seven months, it remained sharp. Reports from panellists indicated that more projects, especially in the construction sector, had bolstered business activity in May,” the report said.

Construction companies experienced the fastest improvement in business conditions (index at 56.2), followed by wholesale and retail (55.5) and travel and tourism (54.2).

New business rose during May, but the rate of growth eased slightly from the preceding month, and was the slowest since October 2016. Anecdotal evidence suggested that promotional activities supplemented the increase in market demand, the report stated.

In terms of hiring, private sector companies continued to raise their payroll numbers, but only at a marginal pace, the report said.

Looking at input costs, inflationary pressures faced by private sector firms eased to a 14-month low.

The increase in input costs in construction and wholesale and retail firms offset a decline reported by travel and tourism firms.

Meanwhile – led by construction firms – output charges rose for the first time in 11 months, although at a fractional pace.

Firms in the travel and tourism and wholesale and retail sectors said that they offered discounts to stimulate demand amid reports of intense competition.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The decline in the Dubai Economy Tracker index in May is consistent with what we’ve seen in the regional country surveys. However, the data still points to a robust expansion in the non-oil private sector last month. The construction sector survey is particularly encouraging with the sector index near the highest level in one-and-a-half years.”

Looking ahead, Dubai private sector companies are optimistic about their growth prospects for the year ahead.

The degree of positive sentiment accelerated to a three-month high, driven by improved optimism across all three monitored key sectors, the report added.