Emirates NBD Dubai Economy Tracker: Strong Increase in Business Activity in May

May survey data for Dubai’s private sector non-oil economy continued the recent twin themes of strengthening output growth and weak job creation. Total business activity increased at the strongest rate since the series was first compiled in 2010. In contrast, employment rose at a marginal rate that was well below the long-run trend. Activity growth remained partly driven by competitive pricing, notably in the construction and wholesale and retail sectors.

The seasonally adjusted Emirates NBD Dubai Economy Tracker Index – a composite indicator designed to give an overview of operating conditions in the non-oil private sector – rose to a 52-month high of 58.5 in May, from 57.9 in April. The rise in the headline figure reflected sharper growth of total activity and new business, while the contribution from employment was almost neutral.

Wholesale and retail remained the best-performing of the three key monitored sectors in May (61.9), mainly reflecting a comparatively strong increase in new business and some employment growth. Travel & tourism registered the second-strongest overall improvement in business conditions on record (59.5) despite a slight fall in jobs, while construction (54.6) was in line with its long-run trend.

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 Dubai Economy Tracker survey points to faster growth in Dubai’s non-oil private sector in May. However, the rise in output and new work continues to be underpinned by price discounting, as firms reduced their selling prices for the 13th consecutive month. The earlier start to Ramadan this year may also have contributed to increased activity, particularly in the wholesale & retail trade sector. Nevertheless, the growth in the volume of activity and new work is not yet translating into meaningful job creation in Dubai’s private sector, which is the key concern for us."

The rate of growth in total non-oil private sector business activity in Dubai accelerated for the fourth time in the first five months of 2019, to a new series-record high. Moreover, growth rates were at new peaks in travel & tourism and wholesale & retail, while construction posted the second-fastest increase on record. The sector data were first compiled in March 2015.

In contrast, employment in the non-oil private sector rose only fractionally in May. Although the strongest since July 2018, the rate of job creation remained much weaker than the long-run trend. Over the past 12 months, the Employment Index has averaged exactly 50.0. Jobs continued to decline in both the travel & tourism and construction sectors, although wholesale & retail posted the fastest growth in three years.

The record increase in total activity was driven by faster growth in new business. The respective index hit a 52-month high. Travel & tourism and wholesale and retail both registered sharp increases in new work during the month. Faster intakes of new work contributed to another improvement in 12-month expectations for activity across the non-oil private sector in May.

Price pressures remained weak in May. Average input costs rose at the slowest pace in the current 14-month sequence of inflation. Meanwhile, prices charged for goods and services fell for the thirteenth month running, albeit at the slowest rate in three months. Discounting was most notable in the construction and wholesale & retail sectors.