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29 March 2024

Dubai Economy Tracker launched: Construction, retail, trade booming

Sheikh Ahmed bin Saeed Al Maktoum, along with senior officials, at the unveiling of Dubai Economy Tracker. (Supplied)

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Dubai Economy Tracker, a new monthly survey dedicated to tracking Dubai’s economy, was launched today by the Dubai-based Emirates NBD bank.

The survey highlights that April was a positive month overall for the Dubai private sector economy, with output and new business volumes continuing to expand at robust rates.

Of the three key sub-sectors monitored by the survey, the fastest pace of output expansion was recorded in construction. Looking ahead, travel and tourism companies are the most optimistic about the year-ahead business outlook. 

The tracker, compiled by Markit, is based on the methodology behind the Purchasing Managers’ Index (PMI) series and provides what Emirates NBD says is “an accurate and timely signal of the performance of Dubai’s non-oil sectors including manufacturing, services, construction and retail”.

The survey covers the Dubai non-oil private sector economy, with additional sector data published for travel and tourism, wholesale and retail and construction. The new trackers were unveiled by Sheikh Ahmed bin Saeed Al Maktoum, Chairman, Emirates NBD, who said: “In the last decade, Dubai’s economy has become one of the most vibrant and diversified in the region. Revenues from the non-oil sector continue to grow and this new report will provide a useful window on emergent trends and opportunities as Dubai continues on its path to growth as a global hub for business, trade, real estate and tourism.”

CEO Shayne Nelson Shayne added: “Dubai has one of the most dynamic economies – not only in the region, but in the world. We can now provide a timely and useful tool that will arm analysts and policy makers with a useful and timely dataset that helps them to better understand economic conditions and the opportunities they represent.”

While the inaugural survey highlights that April was a positive month overall for the Dubai private sector economy, it does however point to signs that growth momentum has slowed from its peak seen at the start of 2015.

“The Dubai Economy Tracker provides additional evidence that suggests a slowing in the Dubai economy since the start of this year, in line with the overall UAE Purchasing Managers’ Index,” said Khatija Haque, Head of Mena Research at Emirates NBD.

“However, the slowdown is from a very high base with key readings still clearly in expansion territory, well above the neutral 50.0 reading,” she said.

“In particular, activity in the construction and retail and wholesale trade sectors was very strong in April, with output readings of 59.6 and 58.4, respectively. The travel and tourism sector showed slower growth, however, with its output index at just 52.3. This is unsurprising as the sector feels the impact of a stronger dollar on demand from key emerging markets. Nevertheless, optimism about future activity remains high,” she added.

Key Findings

·         Dubai private sector output growth eases further from January’s peak

·         Construction was the best performing sub-sector in terms of business activity expansion

·         Input cost inflation remains close to the lowest recorded over the past five years

The latest increase in new business volumes was the weakest for just over three years, which in turn put the brakes on output growth in April. In response to slower growth and greater uncertainty towards the business outlook, a number of firms reined in their job hiring during the latest survey period. Meanwhile, input cost inflation remained very subdued, and strong competition for new work contributed to a fractional decline in average prices charged by private sector companies.

Business activity and employment

The seasonally adjusted Emirates NBD Dubai Business Activity Index posted 57.2 in April, down from 60.6 in March but still well above the 50.0 mark that separates expansion from contraction.

The latest reading pointed to a strong expansion of business activity, but the index was still the lowest since October 2013. By sector, the greatest slowdown was seen in travel and tourism (index fell to 52.3 in April), while construction (59.6) and wholesale and retail (58.4) were the best performing categories monitored by the survey.

Staff hiring patterns also slowed across the Dubai private sector, with the latest increase in employment the least marked since August 2013. Jobs growth moderated in all three sub-sectors tracked by the survey.

Incoming new work and business activity expectations

Softer new business gains were the main reason for the moderation in output growth and job hiring across the Dubai private sector in April. A number of survey respondents cited greater risk aversion among clients, despite improving underlying market conditions. Wholesale & retail was the only sub-sector to avoid the wider slowdown in new business growth.

Looking ahead, Dubai private sector companies are highly optimistic about their prospects for growth. Around ten times as many firms (38 per cent) forecast a rise in output over the next 12 months as those that anticipate a decline (4 per cent). All three key sectors are confident, led by travel & tourism where 42 per cent expect an increase and less than 2 per cent a fall. Reasons cited for confidence included greater marketing and promotional budgets, positive market developments ahead of Expo 2020 and strong underlying economic conditions.

Input costs and average prices charged

The latest data highlighted positive news on the inflation front, with overall input price inflation little changed from the near five-year low seen in March. Both purchasing prices and salary pressures were only marginal during April.

Average prices charged by Dubai private sector firms decreased fractionally in April, with lower tariffs seen in all three sub-categories monitored by the survey. Reports from survey respondents suggested that intense competition for new work, low cost pressures and efforts to increase market share had all contributed to price discounting strategies.