Dubai private sector companies signalled a positive start to the third quarter of 2016, with overall business conditions improving at the fastest pace since March 2015.
This was evident in the rise in the Dubai Economy Tracker Index, which went up from 54.6 in June to 55.9 in July.
The best performing sub-sector monitored by the survey was wholesale & retail (index at 57.3 in July), followed by travel & tourism (55.1) and construction (53.5).
“The wholesale & retail sector in particular probably benefitted from holiday spending over Eid,” said Khatija Haque, Head of Mena Research at Emirates NBD, a Dubai-based bank that publishes the monthly tracker.
“The improvement in the Dubai Economy Tracker index in July is consistent with the rise in the whole UAE Purchasing Managers Index last month, and is underpinned by stronger new work and output growth,” she added.
With the latest monthly rise, the index has now signalled a recovery in operating conditions in each month since the series-record low seen in February 2016. In addition, the latest reading is now back above the long-run survey average (55.1).
The bank says its 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 indicates that the non-oil private sector economy is generally declining; above 50, that it is generally expanding. A reading of 50 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.
Wholesale & retail remains best performing area of activity
Construction and travel & tourism gain momentum in July
Growth of new work continues to accelerate from soft patch recorded earlier in 2016
Business activity and new jobs
Higher levels of business activity have now been recorded for five consecutive months, following the moderate decline seen in February. Moreover, the latest expansion of private sector output was the fastest since February 2015.
While wholesale & retail companies recorded the strongest upturn in business activity, the acceleration in growth since June was driven by steeper rises in the construction and travel & tourism sectors.
Greater levels of business activity translated into a moderate expansion of private sector employment in July.
The latest increase in payroll numbers was the joint-fastest since November 2015, led by a rebound in job hiring among travel & tourism companies.
Incoming new work and business activity expectations
Steeper growth of incoming new business was the key factor underpinning the positive performance recorded in July. The latest expansion of new orders received by private sector firms was the fastest since March 2015.
Survey respondents cited generally favourable business conditions, resilient client demand and competitive pricing strategies. Meanwhile, private sector companies remain confident about the year-ahead business outlook, although the degree of optimism eased since June in all three key sub-sectors.
Input costs and average prices charged
July data signalled that input price inflation remained softer than seen on average since the survey began in 2010. Moreover, the latest rise in overall cost burdens was the slowest for three months.
At the same time, average charges increased only fractionally, although this contrasted with a sustained period of price discounting earlier in 2016.
The overall rise in average prices charged reflected a robust increase across the travel & tourism sector, while lower prices were reported by construction and wholesale & retail companies in July.