Dubai non-oil economy edges up in August, says Emirates NBD
Dubai’s non-oil private sector edged up in August on higher output, but average selling prices contracted for the fourth consecutive month, according to Emirates NBD.
The seasonally adjusted Emirates NBD Dubai Economy Tracker Index – a composite indicator compiled by IHS Markit designed to give an accurate overview of operating conditions in the non-oil private sector economy – lifted to 55.2 in August, up from 54.9 in July. A reading below 50 indicates the non-oil private sector economy is slowing; while a reading above 50, indicates expansion.
“The headline reading increased marginally in August,” said Khatija Haque, head of Mena Research at Emirates NBD. The average index year to date is 55.6 – only slightly lower than the same period last year, when it was 56.5, she said. “This suggests to us that Dubai’s economy is probably growing a similar rate to 2017, or a touch slower.
“Preliminary estimates from the Dubai Statistics Centre put last year’s GDP growth at 2.8 per cent – about half a percentage point slower than our forecast for 2018.”
The wholesale and retail sector was the strongest performer with a reading of 56.5, followed by construction at 55.3 and travel and tourism at 52.9. Both the travel and tourism and construction sectors saw softer growth than in July, while the wholesale and retail trade index was fractionally higher.
Business activity increased at the sharpest rate seen in three months, with output growth in August rising at a faster rate than in July, mainly driven by ongoing projects.
At the same time, order growth slowed modestly and new business improved at the slowest pace since April, Emirates NBD said. That said, the rate of growth remained marked overall, with many firms linking growth to promotional activity and marketing campaigns.
Producer price pressures eased, with the input cost index falling to 51 from nearly 54 in July. However, average selling prices declined with some firms citing promotional activity.
“The selling price index has been in contraction territory for the last four months running, highlighting the lack of pricing power of firms and the competitive market environment,” Ms Haque said. The rate of discounting slowed from July though, she added.
Meanwhile, employment growth remained muted with the employment index easing to 50.4 in August, only slightly above the ‘no change’ level, the report said. The vast majority (94 per cent) of firms surveyed reported no change in staffing levels last month.
Overall business sentiment was strong among firms surveyed, according to Emirates NBD. The degree of optimism was among the strongest seen in the last six and a half years. Expo 2020 In particular is expected to stimulate growth across the private sector economy, firms reported.