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Dubai’s private sector output expands at a fast pace in May

Emirates NBD Dubai Business Activity Index reaches 57.6.

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Dubai — Spurred by a faster pick up in construction and travel and tourism industries, Dubai’s private sector business activity recorded a modest rebound in May for the first time since January, according to the latest Emirates NBD Dubai Economy Tracker report released on Tuesday.

Private sector companies registered a pickup in output growth from the 18-month low recorded during April. The latest survey also reports a slightly faster expansion of incoming new work, but is still the second-slowest since March 2012.  Other upbeat indicators include modest job creation and positive sentiment regarding the business outlook.  

Construction was the best performing among the three key sub-sectors in terms of output and employment growth, “largely reflecting a sharp and accelerated increase in new development projects,” the report produced by Markit on behalf of the bank said. 

Survey respondents commented on intense competition for new work and a more subdued appetite for spending among clients. The main exception was the construction sector, where new work increased at a sharp and accelerated pace.

Tim Fox, Chief Economist at Emirates NBD, said the improvement in the Dubai Economy Tracker in May is very encouraging as it illustrates the resilience of the Dubai economy in the face of ongoing headwinds such as the strong dollar.

“To our mind it appears to be consistent with other tentative signals that suggest that first quarter may have been the low point for growth during the year. However, it is clear that businesses remain concerned about the outlook and with US interest rates likely to rise in second half, there is some basis for confidence to be guarded,” said Fox. The seasonally adjusted Emirates NBD Dubai Business Activity Index picked up slightly to 57.6 in May from 57.2 in April and remained well above the 50.0 threshold that separates growth from contraction. The latest reading was exactly in line with the average since the series began in 2010, but this still signalled a slower growth path than the peak seen at the start of this year, the bank said.

The latest data from HSBC’s Purchasing Managers’ Index (PMI) survey also shows that UAE’s non-oil private sector continued to record robust growth in May even though the headline index dipped to 56.4 from 56.8 in April. The output sub-index also rose at its fastest rate for three months, rising to 62.8 points in May from 62 points in April.

The latest Emirates NBD survey pointed to only a marginal rise in average cost burdens. “Nonetheless, the rate of inflation picked up slightly to its fastest for three months, with construction sector costs increasing at a particularly marked pace. Meanwhile, strong competition for new work encouraged firms to reduce their output charges in May. Although only modest, the overall rate of price discounting was the sharpest recorded for just over two years, led by the travel & tourism sector,” it said. While construction remained a key engine of output growth, with the respective index at 62.7, up sharply from 59.6 in April. Wholesale and retail experienced a moderation in activity growth (index down to 56.5, from 58.4), while travel & tourism under-performed to a lesser extent in May (index up to 54.1, from 52.3 in April).

On the job front, sustained business activity growth contributed to a moderate increase in private sector employment in May. Net job creation has now been recorded for almost three-and-a-half years, although the pace of staff hiring remained slightly weaker than the average seen over this period.

 — issacjohn@khaleejtimes.com 

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