Dubai private sector growth falls to five-and-a-half year low

The reading was the lowest since July 2010, as slower increases in business activity, new orders and employment all weighed heavily.

Dubai's private sector is still expanding but at a slower rate. Satish Kumar / The National

Dubai’s private sector recorded its weakest growth in five-and-a-half years last month amid the strong US dollar and regional and global economic uncertainty.

The Emirates NBD Dubai Economy Tracker Index posted at 51.8 in December, down from 53.4 in November. A score higher than 50 marks expansion.

The reading was the lowest since July 2010, as slower increases in business activity, new orders and employment all weighed on the index.

However, travel and tourism bucked the trend, with stronger expansion in December.

The reading comes amid challenging economic conditions and a continued fall in oil prices. Stock markets around the world have been plagued by volatility in recent months, while the price of Brent Crude was down at $32 this morning.

“The slower rate of expansion in Dubai in December is unsurprising given the headwinds of strong USD and increased uncertainty about both the global and regional economic outlook,” said Khatija Haque, head of Mena Research at Emirates NBD.

“Nevertheless, the improvement in tourism sector activity in December is encouraging. Construction sector output also expanded at a robust pace in December, and we continue to expect this sector to be a positive contributor to Dubai’s economic growth in 2016.”

Emirates NBD’s report said that private sector employment expanded at a softer pace in December. Payroll growth weakened across both travel and tourism and construction companies, while staff numbers were broadly unchanged across the wholesale and retail sector.

Optimism towards the 12-business outlook also slipped. “Dubai’s private sector registered the lowest level of positive sentiment since this index began in April 2012,” the report said.

The Dubai report follows the broader UAE PMI reading for December which last week was shown to have dropped to a 40-month low of 53.3 from 54.5 in November.

Emirates NBD this morning also released its Real Estate Tracker for December, which showed a subdued ending to the year.

The majority of respondents to its survey noted a decline in new buyer enquiries and transactions over the three months to December.

“The latest drop in new buyer enquiries was the sharpest since the survey began in April, which real estate agents linked to weaker investor sentiment and muted underlying market conditions,” Emirates NBD said.

Prices softened throughout 2015 as the government introduced new cooling measures and investment from Russia fell amid the weak rouble.

“The survey is consistent with recent data on residential sales and lettings prices in Dubai, which show prices continuing to ease,” said Ms Haq

“However, the momentum of price decline has moderated in December. The strong USD and low oil prices are likely to remain headwinds for the real estate sector in 2016.”

Further average price falls in Dubai are expected in 2016, with CBRE last month saying that they could drop another 10 per cent.

Dubai Land Department said last week that the value of real estate transactions registered in the city increased by 8 per cent in 2015 to Dh267 billion.

The total number of transactions – including sales, mortgages and transfers – also increased by 18 per cent to 63,719 (2014: 53,871).

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