Business conditions in Dubai registered their slowest improvement in seven months in May amid a slowdown in demand for new orders, according to the latest PMI survey.
Emirates NBD’s Economy Tracker Index, which tracks business confidence from purchasing managers across the non-oil economy, dropped to 55 for the month of May, down from a two-year high in April.
A reading above 50 suggests the non-oil economy is growing, while a reading below 50 suggests that it is contracting.
The emirate’s construction industry was the sector that had the biggest PMI fall during May with its score dipping to 56.2 from 57.9 in the previous month.
Dubai’s retail sector was also affected with its PMI score falling to 55.5 from 57.8 And the emirate’s tourism industry also had its PMI score slipping to 54.2 from 57.0.
Businesses reported that the number of new orders they had received saw the slowest rise since October 2016 as clients displayed signs of worry about darkening economic prospects for the region this year.
Output continued to rise across the private sector, the bank reported, despite the slowdown in growth. Panellists interviewed for the survey said that there was a rise last month in the number of projects, bolstering business activity.
However, respondents reported only a modest increase in payroll numbers for the month.
The data comes a week after Emirates NBD reported that PMI for the whole country fell to a six month low in May amid a slowdown in demand for exports as external demand softened.
“The decline in the Dubai Economy Tracker index in May is consistent with what we’ve seen in the regional country surveys,” said Khatija Haque, the head of Mena research at Emirates NBD.
“However, the data still points to a robust expansion in the non-oil private sector last month. The construction sector survey is particularly encouraging with the sector index near the highest level in one-and-a-half years.”
Analysts said that the decline in headline PMI came off the back of very high readings for the start of the year following a slight uptick in global oil prices at the start of the year.
Oil prices currently hover below the US$50 a barrel mark – down from less than US$30 seen at the start of last year but well down from their level of well over $100 seen between 2012 and 2014.
The figures do not include fallout from the dispute between the UAE, Saudi Arabia, Bahrain and Egypt with Qatar, which analysts say could impact businesses in the UAE.
Last week, the World Bank predicted that growth in Saudi Arabia – the UAE’s largest non-oil trade partner – was anticipated to ease to 0.6 per cent as a result of the Opec oil production cuts. It forecast that real GDP growth in the UAE would stand at 2 per cent in 2017 – 0.5 per cent less than its forecast at the start of the year and down from an estimated 2.3 per cent in 2016.
“I think growth will remain healthy this year as Expo 2020 projects start to kick-in and tourism and property continue to recover,” said Mohamed Abu Basha, the vice president for research at EFG Hermes.
lbarnard@thenational.ae
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