Thursday, Sep 08, 2016

Dubai: Dubai’s private sector continued to report strong growth momentum across all key sectors despite a marginal decline in the Emirates NBD Dubai Economy Tracker Index (DET) from the 2016-high posted in July, to 55.7 in August.

“The DET reading indicates that Dubai’s non-oil private sector continued to expand at a robust rate last month, and growth in the third quarter of 2016 is on track to be the fastest since the first quarter of 2015,” said Khatija Haque, Head of Mena Research at Emirates NBD.

Output/business activity increased sharply again in August, with this index posting a reading over 60 for the second consecutive month. New work growth was also very strong at 59.6, although slightly slower than July. Firms cited improving economic conditions” as well as successful discounting strategies as factors contributing to strong sales growth. The extent of price cuts was evident in the sharply lower output price index (47.4) in August, despite higher input costs faced by firms.

All three key sub-sectors monitored by the survey experienced improving business conditions in August, albeit at a slightly slower pace than in the previous month. Wholesale & retail remained the best performing (index at 55.5), followed by travel & tourism (54.7) and construction (52.6). Survey respondents mainly pointed to strong sales growth in August, supported by improving economic conditions and successful discounting strategies to stimulate client demand.

“After a strong reading in July, it is unsurprising to see a slightly softer Dubai Economy Tracker index in August. Output and new orders still increased sharply last month, partly due to more aggressive price discounting by firms. Businesses also appear to be more optimistic about the coming months, which is encouraging,” said Haque.

Business optimism index

Despite strong new orders and output growth, employment growth remained modest, with this subindex declining to 51.4 in August from 51.8 in July. Firms accumulated inventory at a faster rate in August, as businesses anticipated further demand growth. The business optimism index also increased from the 2016-low posted in July.

DET survey points to solid growth in the emirate so far in the third quarter of 2016, underpinned by aggressive price discounting to support demand. With oil prices remaining well above the lows seen at the start of this year, firms are now looking to Expo 2020 projects to drive further improvements in demand and activity in the coming months.

August data signalled another strong rise in new work received by Dubai private sector companies. The latest expansion in new order books was the second-fastest since March 2015. This contributed to a rebound in confidence regarding the year-ahead business outlook, with the degree of optimism picking up from July’s six-month low.

Input price inflation persisted for the sixth consecutive month in August, with higher operating costs recorded across all three key sub-sectors. However, the rate of inflation remained modest and slower than the long-run survey average. Meanwhile, average prices charged by private sector firms decreased at the fastest pace since February, which was linked to intense competition and promotional discounting strategies during August.

By Babu Das Augustine Banking Editor

Gulf News 2016. All rights reserved.