Dubai’s private sector growth on track for strong first quarter

The Emirates NBD Dubai Economy Tracker Index (DET) February data signalled a further improvement in overall business conditions across Dubai’s private sector economy, supported by sharp rises in output and incoming new work.

The latest index reading at 56.2 was slightly down from January’s 23-month high of 57.1, but was above the series average of 55.1, signalling an acceleration in economic growth at the start of this year.

Output and new work growth continued to expand at a very strong rate in February, although the output index eased to 61.0. New work (62.4) increased at the fastest rate in two years, with firms citing stronger demand and successful marketing and promotional strategies, according to IHS Markit.

The February Dubai Economy Tracker survey continues to show robust expansion in Dubai’s non-oil private sector. Strong growth in output and new orders, which points to solid GDP growth in the first quarter of 2017,” said Khatija Haque, Head of MENA Research at Emirates NBD.

Despite the strong rise in output and new work, employment was broadly unchanged in February at 49.9, thereby ending a seven-month sequence of job creation.

“This may be due to ongoing margin compression, with output prices (48.6) declining on average for the seventh straight month in February even though input prices (51.1) rose. However, firms were slightly more upbeat last month with the business expectations index rising to 73.4 from 70.9 in January,” said Haque.

Trade gains traction

The wholesale and retail trade sector was the best performing of the three key sectors surveyed last month. The sector index rose to 58.3 in February, the highest reading since the series began nearly two years ago. Both output and new work expanded at a faster pace last month, and although selling prices were lower on average month on month.

Employment in the wholesale & retail trade sector declined fractionally in February (49.5), despite the strong growth in demand and output. Firms’ margins remain under pressure and input prices rose (52) while selling prices declined (46) on average. Business optimism declined slightly in February but remains high overall, at 77.5.

Pricing power

The travel and tourism index eased to a still-strong 57 in February from the series high of 57.8 in January. Output and new work indices were marginally lower last month but both still well above 60, signalling very strong growth. Employment was broadly unchanged from January.

Data showed firms in the travel and tourism sector were able to increase selling prices for the fourth month in a row (55) and at the fastest rate on record in February, even as demand continued to strengthen. The rise in prices charged exceeded input cost inflation, providing further relief for firms’ margins in this sector. The business expectations index rose to 78.1 in February from 75.8 in January, signalling greater optimism among firms.

The construction sector index declined to 53.3 in February from 55.4 in January, pointing to slower expansion in the sector last month. Both output and new work grew at a solid rate, but slightly slower than January.

The rise in new work appears to have been driven by significant price discounting and promotional activity; prices charged fell at the fastest rate on record in February. While input costs also declined fractionally last month, output prices fell by a greater extent, squeezing margins.

Employment in the construction sector increased for the third straight month in February, but by less than in January. Business optimism was also lower in February, on the back of slower new orders growth.

Overall, the DET survey data showed new work received by private sector companies in Dubai continued to rise in February.

Companies remain optimistic about their growth prospects for the year ahead. Input price inflation softened since January. Meanwhile, output charges continued to fall with the rate of discounting the weakest in three months and modest overall

source : gulfnews