Shoppers, tourists help Dubai’s private business boom

Photo by Ashok Verma

A marked increase in shopping spend and a bustling travel and tourism sector saw Dubai’s private business activity soar to its best level in almost a year, according to the latest monthly business tracker.

The Emirates NBD Dubai Economy Tracker Index stood at 54.6 in June, up slightly from 54.5 in May, its highest level since August 2015.

Even as the holy month of Ramadan saw a stable tourist arrival, the advent of school holidays meant that more of Dubai residents travelled during the month than in May, and there was also an increase in the arrival of ‘friends and family’ of residents during this period.

In addition, retail continued to perform well, with wholesale & retail being the best performing sub-sector monitored by the survey in June (headline index at 58.2). The month of June saw several retailers launch Ramadan deals and discounts in a bid to lure residents and visitors.

Retail was followed by travel & tourism (54.1) while the latest survey pointed to only a modest upturn in construction sector business conditions (51.5).

The data for June also shows the emirate’s business conditions strengthened amid 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 & tourism and wholesale & retail sectors, states the report.

The index, which tracks operating conditions in Dubai’s non-oil private sector economy, has now registered above the crucial 50.0 no-change threshold for four consecutive months.

The June uptick over May was helped by a sharp and accelerated expansion of incoming new work, the report noted.

“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,” said Khatija Haque, Head of MENA Research at Emirates NBD.

Where are the jobs?

Despite a sustained upturn in private sector output, staffing levels were broadly unchanged in June, data showed.

“…We note that the expansion has not led to increased employment, suggesting that firms are becoming more efficient in their operations,” said Haque.

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.

An impending boom?

Nevertheless, 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 & retail activity, alongside an accelerated rise in travel & 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.

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 & tourism and wholesale & 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.

Inflation tamed?

Input price inflation remained moderate during June, with only the travel & 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.

The Emirates NBD Dubai Economy Tracker, produced by Markit, is based on data compiled from monthly replies to questionnaires sent to senior executives in approximately 600 private sector companies, including manufacturing, services, construction and retail.