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29 March 2024

Robust upturn in Dubai’s private business heralds fresh jobs

Published
By Staff

Private sector business activity in Dubai picked up sharply in August, with the pace of expansion close to the 17-month high recorded during July.

At 55.7 in August, the Dubai Economy Tracker Index was down fractionally from 55.9 in July but above the 50 no-change threshold for the sixth successive month.

The headline index – designed to give an overview of operating conditions in the non-oil private sector economy – is on track for its highest average reading for any quarter since the start of 2015.

Reports from survey respondents cited the launch of new products and a sustained upturn in incoming new work.

Despite a further robust increase in business activity, though, latest data indicated only a marginal rise in private sector employment.

Moreover, the pace of job creation remained softer than the average since the survey began in 2010. Some firms cited a lack of pressure on operating capacity, alongside a squeeze on margins from price discounting.

August data signalled a further strong upturn in business activity across the Dubai private sector economy, with the latest improvement only slightly less marked than the 16-month peak seen in July.

All three key sub-sectors monitored by the survey experienced improving business conditions in August, albeit at a slightly slower pace than in the previous month.

Wholesale & retail remained the best performing (index at 55.5), followed by travel & tourism (54.7) and construction (52.6). Survey respondents mainly pointed to strong sales growth in August, supported by improving economic conditions and successful discounting strategies to stimulate client demand.

The 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 & tourism, wholesale & retail and construction.

“After a strong reading in July, it is unsurprising to see a slightly softer Dubai Economy Tracker index in August. Output and new orders still increased sharply last month, partly due to more aggressive price discounting by firms. Businesses also appear to be more optimistic about the coming months, which is encouraging,” said Khatija Haque, Head of Mena Research at Emirates NBD.

Key Findings

-Robust upturn in business activity and incoming new work

-Business expectations rebound from July’s six-month low

-Price discounting continues in August, despite sustained rise in input costs

Incoming new work and business activity expectations

Mirroring the trend for business activity, August data signalled another strong rise in new work received by Dubai private sector companies. The latest expansion in new order books was the second-fastest since March 2015.

This contributed to a rebound in confidence regarding the year-ahead business outlook, with the degree of optimism picking up from July’s six-month low. Survey respondents cited more stable global economic conditions and expectations of rising demand from projects related to Expo 2020.

Input costs and average prices charged

Input price inflation persisted for the sixth consecutive month in August, with higher operating costs recorded across all three key sub-sectors. However, the rate of inflation remained modest and slower than the long-run survey average.

Meanwhile, average prices charged by private sector firms decreased at the fastest pace since February, which was linked to intense competition and promotional discounting strategies during August.