Dubai business conditions strengthen in June

The Emirates NBD Dubai Economy Tracker has said that business conditions strengthened in June amid the fastest rise in new work since March 2015.

June data pointed to a sustained recovery in growth momentum across the Dubai private sector, led by improving business conditions in the travel and tourism and wholesale and retail sectors. At 54.6, up slightly from 54.5 in May, the headline seasonally adjusted Emirates NBD Dubai Economy Tracker Index picked up to its highest level since August 2015.

The index - a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy - has now registered above the crucial 50.0 no-change threshold for four consecutive months. The rise in the index since May was largely driven by a sharp and accelerated expansion of incoming new work.

Wholesale and retail was the best performing sub-sector monitored by the survey in June (headline index at 58.2), followed by travel and tourism (54.1). Meanwhile, the latest survey pointed to only a modest upturn in construction sector business conditions (51.5).

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 and tourism, wholesale and retail and construction.

Commenting on the Emirates NBD Dubai Economy Tracker, Khatija Haque, Head of MENA Research at Emirates NBD, said, "The improvement in the Dubai Economy Tracker index in June is underpinned by strong growth in new orders and output. The recovery in the travel and tourism sector last month is particularly encouraging as this sector had been relatively soft in previous months. However, we note that the expansion has not led to increased employment, suggesting that firms are becoming more efficient in their operations."

Private sector business activity continued to expand at a robust pace in June, with the rate of growth unchanged from May’s 14-month high. Stronger growth in wholesale and retail activity, alongside an accelerated rise in travel and tourism, helped to offset a weaker expansion of construction output. Survey respondents noted that improving client spending patterns and competitive pricing strategies had led to rising business activity in June.

Despite a sustained upturn in private sector output, staffing levels were broadly unchanged in June. This contrasted with rising employment numbers during the past four-and-a-half years. Some firms noted that uncertainty about the economic outlook had led to more cautious hiring strategies.

New business volumes increased for the fourth month running in June. Moreover, the latest rise was the fastest since March 2015, which survey respondents partly linked to greater consumer spending. Reflecting this, travel and tourism and wholesale and retail were the best performing sectors in terms of new business growth in June. Looking ahead, private sector firms in Dubai remain optimistic about their prospects for growth over the next 12 months. However, the degree of confidence eased slightly since May and remained below the long-run survey average.

Input price inflation remained moderate during June, with only the travel and tourism sector recording a faster rise in average cost burdens than in the previous month. At the same time, average prices charged by Dubai private sector companies were broadly unchanged overall in June. While some firms sought to pass on higher costs to clients, there were also reports citing continued price discounting in order to stimulate new sales.