Tuesday, December 11, 2018 5:07 AM

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Dubai Non-oil private sector growth softens to five-month low

Growth in Dubai’s private sector ended the third quarter on a weaker footing, with the latest expansion being the slowest since April, according to the Emirates NBD Dubai Economy Tracker Index.


“A contraction in employment and softer output growth contributed to the slight loss of impetus. Nonetheless, September’s overall improvement in business conditions remained solid overall,” it said.


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 – fell to 54.4 in September, down from 55.2 in August. Scoring above the 50.0 no-change mark, the latest figure signalled a solid overall expansion, albeit one that was below the historical average.


At the sector level, travel & tourism was once again the weakest performing category at 51.3 in September, followed by construction (53.8) and wholesale & retail (55.5) respectively. A reading of below 50.0 indicates that the non-oil private sector economy is generally declining; above 50.0, that it is generally expanding. A reading of 50.0 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.


Khatija Haque, Head of MENA Research at Emirates NBD, said: The headline Dubai Economy Tracker Index (DET) declined to 54.4 in September signalling the slowest rate of expansion since April. Both output and new work increased in September but at a slightly slower rate than in August. 


“However, employment declined on average (49.2) in September, particularly in the travel and tourism sector. Selling prices in Dubai’s private sector declined for the fifth consecutive month, despite a modest rise in input costs. This suggests that firms increased promotional activity and discounts in order to boost demand. 


“Stocks of pre-production inventories also rose at the slowest rate since July 2016, indicating less willingness on the part of firms to hold inventories. Firms remain highly optimistic about future output however, with many citing Expo 2020 projects and marketing initiatives as reasons for expected higher output in one year’s time.


“The sector surveys showed continued softness in the travel and tourism sector in September, with this sector index falling to the lowest level year-to-date. Momentum in the wholesale & retail and construction sectors also moderated last month.”    


Output across Dubai’s non-oil private sector increased during September. Although the rate of growth eased since August, it remained sharp overall and above the long-run average. Activity increased to the greatest extent in the wholesale and retail sector. Employment levels fell for the first time since March, and at the fastest pace since the survey began in January 2010. Some firms linked job shedding to cost cutting. That said, the rate of contraction was only slight.            

Selling prices in Dubai’s non-oil private sector continued to fall amid intense competitive pressures and promotional activity. The degree of price discounting was modest during September, with the latest decrease extending the current sequence of falling output charges to five months.