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Dubai business conditions see sharpest improvement in two years – survey

Companies operating in Dubai’s private sector experienced a further improvement in business conditions at the start of the second quarter.

This was indicated by the seasonally adjusted Emirates NBD Dubai Economy Tracker Index – designed to give an overview of operating conditions in the non-oil private sector economy – rising from 56.6 to 57.7. Moreover, the headline index signalled the fastest upturn in operating conditions in 26 months.

April data indicated robust performances across all three key sub-sectors monitored by the survey, led by an accelerated upturn in construction (index at 57.9), closely followed by wholesale & retail (57.8) and travel & tourism (57.0).

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.

Khatija Haque, Head of MENA Research at Emirates NBD, said: “It is encouraging to see the sharp rise in the construction sector index in April, as this had lagged both wholesale & retail trade and travel & tourism indices in the first quarter.  The latest Dubai Economy Tracker survey supports our view that investment in infrastructure ahead of Expo 2020 will be a key driver of Dubai’s growth over the next 2-3 years.”

Key findings are:

Dubai Economy Tracker Index climbs to the highest in 26 months

Strong rise in business activity, led by wholesale & retail and construction

Fastest increase in new orders in just over two years

Business activity and employment

The latest upturn in private sector operating conditions was driven by a steep increase in output, led by wholesale & retail and construction. Furthermore, the rate of growth was the second-sharpest in 26 months (behind January 2017).

Survey respondents attributed greater business activity to more favourable economic conditions and new projects.

Employment increased across all the three key sectors during April, albeit at modest rates.

Incoming new work and business activity expectations

New business continued to rise for the fourteenth consecutive month in April, which panellists linked to a generally supportive economic backdrop and, in some instances, promotional discounts, and more construction projects. By sector, construction firms reported the strongest upturn in new business.

Reflective of robust improvements in the health of all three key sub-sectors, Dubai private sector companies indicated greater optimism about their prospects for activity growth over the year ahead from March’s seven-month low. Overall, the degree of positive sentiment was broadly in line with the average recorded since the series began in April 2012.

Input costs and average prices charged

Average cost burdens increased at a modest pace across Dubai’s private sector in April, with the rate of inflation broadly in line with the trend recorded over the current 14-month sequence of rising prices. Construction and wholesale & retail firms faced increased input costs, whereas travel & tourism noted a fall. In spite of rising costs, average selling prices continued to fall for the ninth month in succession. Furthermore, the rate of decline was faster than the preceding month and modest overall. All three key-sub sectors offered discounts to attract customers amid reports of intensive competition.