Monday 09, April 2018 by Jessica Combes

March sees marked improvement in UAE business conditions

 

March data signalled an improvement in business conditions across Dubai’s non-oil private sector, with sharp growth in both output and new work contributing to the latest expansion, though employment slipped into contraction for the first time since February last year.

The seasonally adjusted Emirates NBD Dubai Economy Tracker Index—a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy—was at 55.3, down from 55.8 in February. Scoring well above the neutral 50.0 threshold, the figure indicated a marked expansion that was in line with the historical average, albeit the lowest for three months.

Growth was recorded across all three monitored sub-sectors in March, led by travel & tourism (56.7), followed by wholesale & retail (56.3) and construction (53.2). 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 covered the Dubai non-oil private sector economy, with additional sector data published for travel and tourism, wholesale and retail and construction.

span style="font-size: small;">“While the Dubai Economy Tracker fell to a four-month low of 55.3 in March, it remained firmly in expansionary territory, with travel and tourism the outperformer. That being said, firms continue to make price discounts in order to bolster demand. Lower input costs for the first time in over two years will have helped, but squeezed margins appear to be taking their toll on employment, which fell below 50.0 for the first time since February 2017. Nevertheless, we anticipate faster growth in the Dubai economy this year, bolstered by ongoing infrastructure projects and greater government spending,” said Daniel Richards, MENA Economist at Emirates NBD. 

Non-oil private sector firms noted a sharp level of output growth during March, albeit at a slower rate than that seen in the previous two surveys. According to anecdotal evidence, strong inflows of new orders were linked to rising business activity.

Job shedding returned to the non-oil private sector for the first time in 13 months during March. The finding followed unchanged employment levels in the preceding survey period. The rate of contraction was marginal overall, however.

Successful promotional strategies helped firms continue to generate strong growth of new work in March. The rate of expansion was broadly in line with the average seen over the last two years during the latest survey. Furthermore, the most recent improvement in new work extended the current sequence of growth to 25 months.

Despite easing to a seven-month low in March, business confidence towards future growth prospects remained strongly positive overall. Optimism was underpinned by new project wins and an expected upturn in economic conditions.

In terms of inflation, average cost burdens faced by non-oil private sector firms fell for the first time since February 2016. Panel respondents frequently reported price discounting at suppliers. That said, the rate of decline was fractional overall.

Mirroring the trend seen for input costs, prices charged dropped at a moderate pace in March, thereby ending a three-month sequence of inflation. Businesses in Dubai noted that output charges had been reduced to help stimulate client demand.

  

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