Dubai Private Sector Maintained Strong Growth In February

Dubai: The Dubai Economy Tracker Index (DET) for February signalled a further strong improvement in business conditions across Dubai’s non-oil private sector.

Although the headline index eased slightly from 56 in January to 55.8 in February, it still indicated a strong expansion in the non-oil private sector.

“The PMI survey data for February continued to show solid growth in Dubai’s economy, with the travel and tourism sector performing particularly well after a relatively soft Q4 2017. Overall we expect Dubai’s economy to grow at a slightly faster rate this year, underpinned by infrastructure investment and government spending,” said Khatija Haque, Head of Mena Research at Emirates NBD.

 Overall we expect Dubai’s economy to grow at a slightly faster rate this year, underpinned by infrastructure investment and government spending.”

 - Khatija Haque | Head of Mena Research at Emirates NBD 

Both new orders and business activity posted readings over 60, signalling very strong growth in those components of the survey. Despite this, employment levels were unchanged from January as firms continued to absorb rising input costs. Although the rate of increase in input costs eased in February, firms still reported sharply higher costs last month.

Prices increased only marginally on average. Inventory accumulation also slowed further in February, as many firms had built up inventories in December, before VAT came into effect. Business optimism was slightly weaker in February but firms remain strongly optimistic overall.

The sector surveys showed a sharp rebound in the tourism sector after a lacklustre fourth quarter 2017. Travel & tourism index posted highest reading in 13 months. The wholesale and retail trade sector also continued to perform strongly in February, while there was a slight loss of momentum in the construction sector last month.

Output and new work rose at a sharp rate in February and input costs moderated after a spike in January (which was as a result of VAT). After five consecutive months of price discounting, firms in the travel and tourism sector were able to marginally increase selling prices in February.

Employment index

Data showed, wholesale & retail trade sector saw faster expansion in February with sector index rising to a three-month high of 57.3, indicating a strong rate of growth in the sector. Both output and new orders growth were exceptionally strong. However, job growth was only marginal with the employment index at just 50.4, down from 51.9 in January. Encouragingly, selling prices rose for the fourth month in a row, which shows that firms in the sector do have some pricing power.

Growth in the construction sector was slower in February, after a solid start to 2018. The sector index declined to 53.9 largely on the back of softer new orders growth and a marginal decline in employment in the sector. Output increased sharply in February but at a slightly slower rate than in January. Nevertheless, optimism in the sector remains high.

“We expect construction sector activity this year to be underpinned by increased infrastructure and development spending, as Dubai gears up for Expo 2020,” said Haque.