Dubai business activity slows to 68-month low

Published November 10th, 2015 - 06:06 GMT

Dubai's private sector economy registered a slower expansion of business activity in October, with the rate of growth edging down to a 68-month low, a survey report released on Monday shows.

Weaker growth was partly driven by a slight fall in business activity at travel and tourism companies, while both construction, wholesale and retail sub-sectors registered slower increases in activity in October, according to Emirates NBD Dubai Economy Tracker.

"Activity growth in Dubai slowed sharply in October, with the travel and tourism sector showing an outright contraction in output and employment. However, we expect activity in this sector to recover as we head into the winter high season. The construction sector survey data is encouraging as it signals relatively robust growth in new orders and output in October, despite heightened concerns about government spending in the face of sustained low oil prices," said Khatija Haque, head of Mena research at Emirates NBD.

At 51.4, the seasonally adjusted Emirates NBD Dubai Business Activity Index remained above the neutral 50 value in October to signal a further rise in private sector business activity. However, the reading was down from 56 in September and pointed to the weakest rate of expansion since February 2010.

Looking at the three key sub-sectors, the pace of activity growth moderated across both construction, wholesale and retail companies, while travel and tourism firms saw a slight fall in activity

"Though robust overall, growth in new orders followed a similar trend to activity, and registered the second-weakest rate of expansion since December 2010. With output and new orders both expanding at or close to multi-year lows, private sector firms raised their staff numbers at the weakest rate in nearly four years in October," the survey report said.

Companies meanwhile signalled a sustained squeeze on operating margins, with input prices rising moderately while prices charged marginally declined.

The report pointed out that in line with the trend for activity, employment growth slowed in October, with private sector companies registering the weakest increase in staff numbers in the current 46-month sequence of job creation.

October data signalled a sustained upturn in new work placed at Dubai private sector companies. The rate of growth was the second-slowest seen since December 2010, with all three key sub-sectors noting weaker expansions in new orders.

"Business confidence towards the year ahead weakened across Dubai's private sector in October amid reports of relatively subdued global economic conditions. Furthermore, the degree of optimism was on par with May's three-year low, with all three key sub-categories noting reduced sentiment towards future activity growth.

"Nonetheless, a number of firms commented that forecasts of improving regional market conditions, alongside new marketing strategies and projects ahead of the Expo 2020, would boost activity," the Emirates NBD report said.

Input costs at Dubai private sector companies rose only modestly over the month. All three monitored sub-sectors saw subdued increases in input prices.

Panellists generally commented that increased competition between suppliers had helped to restrict price increases for inputs. Private sector companies in Dubai cut their selling prices for the ninth successive month as competition for new work intensified.

The International Monetary Fund had said the UAE economic outlook is expected to moderate amid lower oil prices.

Non-oil growth is projected to slow to 3.4 per cent in 2015, before increasing to 4.6 per cent by 2020, supported by the implementation of mega projects and private investment in the run-up to Expo 2020.

By Issac John

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