Dubai’s non-oil private sector economy expands in March
Dubai’s non-oil private sector economy expanded at a faster rate in March, with total business output increasing at the fastest rate since January 2015, according to Emirates NBD.
Moreover, two of the three key monitored sectors, the tourism and retail industries posted record upticks in activity and wholesale and retail – posted series record increases in activity.
The seasonally adjusted Emirates NBD Dubai Economy Tracker Index — a composite indicator developed with IHS Markit and designed to give an accurate overview of operating conditions in the non-oil private sector economy – rose to 57.6 in March, the highest since May 2018, from 55.8 in February.
The March figure was also the joint-highest in nearly two years and above the long-run average of 55.2 for the series since 2010, the bank noted.
The improvement in non-oil business activity was led by the travel and tourism industry – which reached a record high of 59.8, and wholesale and retail, which stood at 59.7, just shy of the last record set in October 2017.
However, business conditions within the construction industry were the weakest in 28 months due to a softening in new order growth, Emirates NBD said.
Business conditions improved at stronger rates in travel and tourism. Travel and tourism saw its headline index reach a record high of 59.8, while the headline figure for wholesale and retail was 59.7, just shy of the peak set in October 2017.
However, business conditions within the construction industry were the weakest in 28 months (51.8), due to a softening in new order growth, Emirates NBD said.
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.
“While the rebound in the headline Dubai Economy Tracker Index is encouraging, it is clear that firms continue to price discount in order to secure new work and boost activity. The pressure to cut costs means that the recovery in the volume of activity has not translated into much job growth in the private sector,” said Khatija Haque, head of Mena Research at Emirates NBD.
Total non-oil private sector output increased at the fastest pace since January 2015. Moreover, the rate of expansion was the fifth-strongest on record since the series began in 2010. Of the three key sectors, travel and tourism posted the steepest growth.
Workforces were expanded to support activity levels in March, although the rate of job creation was modest. This partly reflected broadly no change in staffing in the travel and tourism sector.
Inflows of new business to private sector non-oil firms in Dubai rose in March. Moreover, the rate of expansion was the fastest since May 2018. Travel and tourism posted the strongest growth among the three key sectors. Meanwhile, companies’ expectations for total activity over the next 12 months were the second-strongest on record in March.
Input costs and average prices charged
Average input prices rose for the twelfth month running in March. That said, the rate of inflation was modest and eased since February. Cost pressures were strongest in the travel and tourism sector.
Non-oil private sector firms in Dubai cut their prices charged for goods and services for the eleventh month running in March. This marked the longest sequence of discounting since the series began in 2010. The rate of price discounting was the steepest since December 2018.