Dubai Economy Tracker falls to 52.5 in October
- Dubai Economy Tracker falls to 52.5 in October, from 54.4 in September Employment levels contract again
- Business confidence surges to record high, despite weaker new order growth
This report contains the latest release of data collected from a monthly survey of business conditions in the Dubai non-oil private sector. Sponsored by Emirates NBD and produced by IHS Markit, the survey provides an early indication of operating conditions in Dubai. The headline Emirates NBD 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.
The survey covers the Dubai non-oil private sector economy, with additional sector data published for travel & tourism, wholesale & retail and construction.
Summary
Whilst the latest data signalled an improvement in the health of Dubai’s non-oil private sector, the rate of growth weakened to a 31-month low. Slower improvements in activity, new work and another contraction in employment contributed to the slowdown. Contrary to the general trend, the construction sector saw a stronger expansion in the latest survey.
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 – posted at 52.5, down from 54.4 in September, and the weakest figure since March 2016. Nonetheless, it remained above the critical 50.0 mark in October, thereby stretching the current phase of expansion to 32 months.
Travel & tourism was the weakest performing sector in October at 49.6, followed by wholesale & retail (53.7) and construction (55.5).
Business activity and employment
Output across the non-oil private sector increased at the slowest rate since December 2017. The expansion was below the historical average. The travel & tourism sector saw the weakest improvement during the latest survey period.
October data signalled a modest fall in employment in Dubai’s non-oil private sector. The rate of contraction matched the record pace recorded in the preceding survey. Some firms cited cost cutting as a reason behind job shedding.
Incoming new work and business activity expectations
Businesses reported a further increase in incoming new work during October, thereby extending the current phase of growth to 32 months. That said, the latest expansion was the weakest in two-and-a-half years. Whilst the increase was solid overall, it scored well below the historical average amid reports of slowing client demand growth in the non-oil private sector.
Despite the slowdown in output and new business, future growth prospects rose to a record high since this index began in 2012. Firms expressed optimism towards new project wins and developments surrounding Expo 2020.
Input costs and average prices charged
Average cost burdens in Dubai’s non-oil private sector increased for the seventh month running in October. Furthermore, the rate of inflation accelerated to a three-month high.
Output charges fell once again in the latest survey. Some firms linked lower selling prices to promotional activity. The rate of decline was modest overall, however.
Travel & Tourism | Business Activity and Employment
Business activity growth continues to soften
At 52.4 in October, down from 53.6 in September, the seasonally adjusted Business Activity Index for the travel & tourism sector fell to a ten-month low. The pace of expansion has slowed for five successive months.
Adjusted for seasonal factors, the Employment Index reached a record low during the latest survey period. The deterioration in employment levels was modest overall, however.
Travel & Tourism | Incoming New Work and Business Activity Expectations
Incoming new work declines for first time since February 2016
Travel & tourism companies across Dubai reported a fall in incoming new work during October. The fall was only the second in the survey history. Around 29% of firms noted a decline, compared with 24% that reported an increase in new business.
Despite contracting new work, firms continued to express optimism towards future business activity. The overall degree of positive sentiment reached a four-month high in the latest survey period.
Travel & Tourism | Input Costs and Average Prices Charged
Input price inflation sharpens
At 54.0 in October, the seasonally adjusted Input Costs Index accelerated to a three-month high. The figure was indicative of a marked increase in average cost burdens faced by businesses in Dubai’s non-oil private sector.
Output charges fell once again in the latest survey period. The finding thereby streched the current phase of price discounting to four months.
Wholesale & Retail | Business Activity and Employment
Job creation returns to wholesale & retail sector
October data signalled another slowdown in the rate of business activity growth across the wholesale & retail sector. Nonetheless, the figure remained well above the neutral 50.0 threshold and signalled a solid overall expansion.
At 50.4 in October, the seasonally adjusted Employment Index indicated a return to job creation in the latest survey period. The rate of growth was marginal, however.
Wholesale & Retail | Incoming New Work and Business Activity Expectations
Business confidence hits record-high
Adjusted for seasonal influences, the Incoming New Work Index registered above the 50.0 no-change mark at 56.2 in October, thereby indicating a solid expansion in new order books. That said, the expansion was weaker than the long-run average.
Business confidence towards future growth prospects hit its highest level since the series began in March 2015. According to anecdotal evidence, marketing efforts are anticipated to lead to stronger inflows of new business over the upcoming year.
Wholesale & Retail | Input Costs and Average Prices Charged
Selling prices fall at sharp pace during October
Continuing the sequence of input price inflation seen since April, businesses in the wholesale & retail sector noted another increase in average cost burdens during the latest survey period. The rate of inflation eased to a seven-month low, however.
At 43.8, the seasonally adjusted Prices Charged Index registered a sharp decline in selling prices across the wholesale & retail sector. Some firms linked falling charges to increasing competition.
Construction | Business Activity and Employment
Business activity growth hits four month high amid new project wins
October survey data signalled a sharp upturn in business activity growth. The latest expansion was steep overall and the strongest recorded since June. Anecdotal evidence linked the improvement to government projects.
At 51.6 in October, the seasonally adjusted Employment Index scored above the critical 50.0 mark once again. The figure was indicative of a modest level of job creation in Dubai’s construction sector.
Construction | Incoming New Work and Business Activity Expectations
Degree of positive sentiment matches September’s record high
The seasonally adjusted Incoming New Work Index hit a three-month high during October. The rate of growth was sharp overall and above the series’ long-run average. Some firms linked higher inflows of new business to government contracts.
Future growth prospects in Dubai’s construction sector matched September’s survey-record high in the most recent survey period. Anecdotal evidence suggested that developments surrounding Expo 2020 are forecast to lead to higher output over the next 12 months.
Construction | Input Costs and Average Prices Charged
Input cost inflation eases to three-month low
Input cost inflation faced by firms in Dubai’s construction sector eased to a three-month low in the latest survey period. The rate of inflation was only slight overall.
At 48.6 in October, the seasonally adjusted Prices Charged Index remained below the neutral 50.0 threshold for the second month running. The rate of price discounting was modest overall and broadly in line with that registered in September.
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