UAE consumer spending rises 20% as economy set for fastest expansion in a decade

Retail spending grows 15% on an annual basis in the January-September period while non-retail spending rises 29%, Majid Al Futtaim says

Mirdiff City Centre in Dubai. Majid Al Futtaim expects a robust fourth quarter for the retail sector in the UAE. Silvia Razgova / The National

Consumer spending in the UAE jumped 20 per cent on annual basis in the first nine months of this year despite inflation concerns, with the Arab world’s second-biggest economy set to expand at its fastest pace in over a decade.

Retail spending grew by 15 per cent annually in the nine-month period while non-retail spending rose 29 per cent over the same period, Majid Al Futtaim, the Middle East's largest mall operator, said in its State of the UAE Retail Economy report on Monday.

Spending also increased 12 per cent in the third quarter to the end of September, driven by strong growth in the fashion, watches and jewellery segments.

The third-quarter spending increase marks quarter-on-quarter growth for five quarters in a row across all sectors, Majid Al Futtaim said, citing point-of-sale data.

While inflation still remains a concern for consumers, it was less so during the third quarter. About 30 per cent of those surveyed said they were “very concerned” by inflation.

However, the reading was down 9 per cent on the previous quarter, according to Majid Al Futtaim research.

Overall, 92 per cent of respondents expressed “some level of concern” but said they were adjusting to the new norm by remaining cautious in purchasing, the report said.

The sharp rise of the e-commerce sector continued in the first nine months of 2022. E-commerce sales are projected to rise by 22 per cent to $6 billion this year and remain on track to reach $9.2bn by 2026.

E-commerce spending increased 34 per cent annually in the January-September period, accounting for 11 per cent of total retail economy sales in the country.

“Another strong quarter for the UAE retail economy showcases notable sector-wide resilience and reinforces the country’s steady march towards a return to sustainable growth,” said Alain Bejjani, chief executive of Majid Al Futtaim Holding.

“With all indicators pointing to a strong fourth quarter this year, and the lifting of Covid-19 restrictions, the UAE has put the pandemic-related turbulence firmly in the rear view.”

The UAE economy, which made a strong rebound from the pandemic-driven slowdown in 2021, has picked up pace this year. It is set to expand by 5.4 per cent in 2022, according to the UAE Central Bank.

Emirates NBD, Dubai’s biggest lender, expects the economy to expand 7 per cent in 2022, setting up the country for its fastest annual expansion since 2011, when output grew by 6.9 per cent.

Meanwhile, Abu Dhabi Commercial Bank projects growth of 6.2 per cent, driven by both the oil and non-oil sectors of the economy.

Business activity in the UAE’s non-oil private sector economy continued to improve in October, with S&P Global purchasing managers’ index rising to 56.6, as new business and output climbed along with a rise in demand and employment.

This was a shade under the three-year high of 56.7 achieved in August.

Alain Bejjani, chief executive of Majid Al Futtaim Holding. Bloomberg

The country, which has instituted company and market reforms and introduced several long-term visa options for professionals and investors, removed nearly all Covid-19 restrictions on Monday.

The move is set to further boost its retail economy, drive tourism and speed up the recovery of the country’s property sector.

The travel and tourism sector has already bounced back strongly, with “consumers now spending more than before the pandemic-induced turbulence”, Majid Al Futtaim said.

As restrictions continue to ease, pent-up travel demand has been unleashed — with Dubai experiencing a 182 per cent year-on-year rise in international visitors between January to August.

Hotels have been a big beneficiary of the increase in tourist arrivals, with the number of occupied room nights rising 28 per cent annually in the January-August period and 17 per cent above pre-Covid-19 levels in 2019, at slightly under 24 million, the report said.

The UAE property market has also made a strong recovery this year, with Dubai recording the most robust performance in the first nine months of the year since 2011.

The volume of transactions in the nine-month period increased 60 per cent, compared with a year earlier. It increased 14 per cent in the third quarter to 25,500 deals. The value of deals climbed 77 per cent to Dh184bn this year, the report said.

The continuation of forward-thinking government initiatives has underpinned the steady progress, Mr Bejjani said.

“We only need to consider the ongoing opportunity, security and safety this nation offers to see why the world continues to flock to the region to build their future here.”