Don't be gloomy, Dubai business is booming
While Dubai's travel and tourism remained the best-performing category , wholesale and retail, and construction closely followed with better performance.
Dubai - Private-sector companies optimistic on their prospects for activity growth over coming years
Dubai's private sector started 2017 on an upbeat note by recording the sharpest rise in output in almost two years, new data suggests.
Travel and tourism continued to drive the upswing supported by wholesale, retail and construction sectors in January signalling the strongest improvement in non-oil private sector business conditions, the Emirates NBD Dubai Economy Tracker Index shows.
Buoyed by the good start of the year, Dubai's private sector companies remained optimistic about their prospects for activity growth over coming years. Survey respondents commented on new projects and forecasts of improving market conditions, the bank said.
Sheikh Ahmed bin Saeed Al Maktoum, Chairman of the Dubai's Economic Development Committee, President of the Dubai Civil Aviation Authority, and Chairman of Emirates airline and Chief Executive of the Emirates Group, has predicted Dubai's growth would gain traction by 3.1 per cent in 2017. With a diversified economy that focuses on tourism and international business services, Dubai has been outperforming most of the Gulf Arab oil exporting economies in an era of low oil prices.
Sultan bin Saeed Al Mansouri, Cabinet Member and UAE Minister of Economy, expects the country's GDP growth this year to remain almost steady compared to 2016 at three per cent.
The seasonally-adjusted Emirates NBD index registered 57.1 at the start of the year, up from 55.9 to signal the fastest rate of improvement in 23 months. All the three key sub-sectors monitored by the survey recorded marked rates of expansion.
While travel and tourism remained the best-performing category (index at 57.8), wholesale and retail (57.7) and construction (55.4) closely followed with better performance.
The headline 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 50.0 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 rise in the Dubai Economy Tracker index in January to its highest level in nearly two years was mainly due to faster expansion in output and new orders. While some of the improvement was attributed to new projects, price discounting is still playing a significant part in supporting demand," Khatija Haque, head of Mena Research at Emirates NBD, said.
January witnessed the sharpest rise in output for almost two years as firms continue to discount output prices despite further increase in input costs, the bank said.
The wholesale anf retail sector signalled the strongest rate of activity growth in seven months, with some firms linking the increase to promotional activities to stimulate client demand. Meanwhile, construction firms widely cited new projects as the principal factor behind the increase in output, Emirates NBD analysts said.
Despite the steep increase in business activity, job creation was modest overall, although the pace of staff hiring picked up slightly since December.
January data signalled greater amounts of new work for the eleventh month in succession, mirroring the trend for business activity. "The latest increase in new business was the fastest since March 2015. Anecdotal evidence suggested that stronger underlying demand combined with promotional activities supported sales."
Input cost inflation eased since December and pointed to only a marginal rate of increase. Despite sustained cost pressures, private sector companies discounted their output charges for the sixth consecutive month. Firms in the construction and wholesale and retail sectors reported that intense market competition had left them unable to pass on higher cost burdens to clients. Travel and tourism sector bucked the overall trend, and raised their average selling prices at a marked rate amid strong underlying demand conditions.