Dubai’s non-oil private sector slows in July despite higher output

Latest tracker from Emirates NBD shows slowest rate of growth in three months

Business conditions in Dubai's non-oil private sector reached their slowest in three months in July, according to lender Emirates NBD's latest economy tracker. Pawan Singh / The National

Business conditions in Dubai’s non-oil private sector expanded at the slowest rate in three months in July, even as output improved due to a rise in new orders, according to the latest survey from Emirates NBD.

“While firms reported higher output and new orders in July, this was on the back of extensive price discounting, with average selling prices falling at the sharpest rate since January 2017,” said Khatija Haque, head of Mena research at Emirates NBD, Dubai's largest lender by assets.

“At the same time, input costs continued to rise, further squeezing margins. Against this background, it is unsurprising that employment growth so far this year has been the softest on record.”

The Emirates NBD Dubai Economy Tracker Index – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – registered 54.9 in July, down from 56.0 in June, below the long-run average, although there was still an overall improvement, Emirates NBD said.. A reading of below 50 indicates that the non-oil private sector economy is generally declining, above 50 it is generally expanding. A reading of 50 signals no change.

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Construction companies reported the sharpest growth in July, at 56.9, followed by wholesale & retail at 56.3 and travel & tourism showing a reading of 54.5. All three sectors experienced a softening in growth when compared to June.

Businesses reported a sharp improvement in incoming new work in July, driven by robust domestic client demand and promotional activity. Business sentiment and expectations remained strongly optimistic despite easing to a three-month low in July, with companies pinning hopes on new projects relating to Expo 2020 Dubai, and successful marketing, said Emirates NBD.

However, input price inflation accelerated to a three-month high reflecting higher wage and raw material costs. Promotional activity led to the greatest fall in selling prices across the private sector since January 2017, after ongoing price discounting for the last three months, the tracker showed.

Job creation increased, led by the construction sector, but it remains relatively subdued by historical standards, the bank added.