Dubai’s May private sector economic expansion robust

Dubai: The Emirates NBD Dubai Economy Tracker Index rose to 54.5 in May from 52.7 in April, the highest reading since August 2015 indicating robust improvement in overall business conditions during the month.

“The main drivers for the improvement in business conditions last month were sharp rise in output and new work, pointing to firm domestic demand. 

The output index rose 3 points to 58, the highest reading in more than a year, while the new work index jumped 3.4 points to 57.8 in May,” said Khatija Haque, Head of MENA Research at Emirates NBD.

May data signalled a rise in business activity for the third month running, which firms linked to new sales wins, greater confidence among clients and successful marketing strategies. 

The latest expansion of private sector output was the fastest since March 2015 and above the average since the survey began in 2010. 

Steeper growth of wholesale, retail and construction activity helped to offset a slight slowdown across the travel and tourism sector.

Firms surveyed mentioned increased confidence and willingness to spend among clients, and successful marketing strategies are reasons for the sharp increase in activity and new work last month.

“While employment growth was modest, more firms increased hiring in May compared with April. Firms continued to cut prices in order to secure new work, despite rising input costs. Consequently, margins remain under pressure. Overall, firms were more optimistic about prospects in the coming year than they were in April,” said Haque.

Private sector companies remain upbeat about their growth prospects for the next 12 months, and the degree of positive sentiment picked up slightly since April. 

The construction and wholesale and retail trade sectors expanded at a faster pace in May compared with April, while the travel and tourism sector slowed slightly last month, according to the DET sector surveys.

Among the key sectors monitored, the wholesale and retail sector index rose to 56.4 in May, the highest reading since September 2015. Output/ business activity rose to nearly 60, while the new work index jumped to 60.9 from 56.0 in April, signalling very strong growth. 

Price discounting likely contributed to the strong rise in new work and output last month, with the prices charged index falling to 44.6 from 46.5 in April, even as input costs rose. However, some survey panellists highlighted an improving business climate.

Employment growth in the wholesale and retail sector accelerated last month, with the index rising to 53.8, beating the average for the whole of Dubai. Business expectations also improved in May.

Strong output and new work growth helped push the construction sector index to the highest level since May 2016. The output index rose to 59.9 (an eight-month high) from 55.5 in April, while new work rose to 58.6 from 54.3 in April. 

Firms surveyed indicated that improved market conditions and new projects boosted activity in May. Employment increased moderately last month, but at a slightly slower pace than April. 

Input cost inflation also eased, but firms continued to cut output prices on average, as they competed to secure new work. (Gulf News)