UAE. Private sector companies in Dubai reported another solid improvement in business conditions during November. Moreover, the latest survey highlighted a recovery in growth momentum from the six-month low recorded in October.
At 55.2 in November, up from 53.2 in the previous month, the seasonally adjusted Emirates NBD Dubai Economy Tracker Index signalled the strongest improvement in business conditions since August. As a result, the index signalled that overall growth was broadly in line with the average since the survey began at the start of 2010 (55.1).
November data pointed to a mixed picture across the three key sectors monitored by the survey. Travel & tourism was the best performing area (57.5), followed by wholesale & retail (56.1), while construction companies reported only a modest upturn in overall business conditions (51.8).
The headline Emirates NBD Dubai Economy Tracker Index is derived from individual diffusion indices which measure changes in output, new orders, employment, suppliers’ delivery times and stocks of purchased goods.
A reading of below 50.0 indicates that the non-oil private sector economy is generally declining; above 50.0, that it is generally expanding. A reading of 50.0 signals no change.
The survey covers the Dubai non-oil private sector economy, with additional sector data published for travel & tourism, wholesale & retail and construction.
Commenting on the Emirates NBD Dubai Economy Tracker, Khatija Haque, Head of MENA Research at Emirates NBD, said: “The Dubai Economy Tracker signals a faster rate of expansion for non-oil firms in Dubai in November, and this seems to have been led by the travel & tourism sector. The introduction of visas-on-arrival for Chinese nationals (announced in September) may have contributed to the growth in this sector over the last couple of months.”
- Strongest upturn in Dubai private sector business conditions since August
- Travel & tourism records strongest growth, followed by wholesale & retail
- Job creation remains marginal in November
Business activity and employment
The rebound in the headline index was supported by a sharp and accelerated expansion of private sector output in November. Survey respondents commented on stronger consumer demand in particular, alongside new product launches and successful price discounting strategies. However, the construction sector bucked the overall trend in November, with output growth slipping to a five-month low amid reports citing subdued investment spending among clients.
Employment levels increased slightly in November, but the rate of job creation remained weak in comparison to the trends seen prior to mid-2015. Sector data indicated a return to jobs growth in travel & tourism and wholesale & retail, but construction companies reported a drop in staffing levels for the first time since June.
Incoming new work and business activity expectations
Stronger new business volumes were the main driver of the upturn in business conditions during November, with all three key sub-sectors reporting faster sales growth. Anecdotal evidence suggested that an improving economic backdrop and greater confidence among clients had underpinned the rise in new work. Looking ahead, private sector companies in Dubai are optimistic about their growth prospects for the year ahead, particularly travel & tourism companies. A number of firms cited projects related to Expo 2020, alongside hopes of a general upturn in economic conditions across the region.
Input costs and average prices charged
November data signalled that input price inflation edged up to its strongest for five months, led by the steepest rise in construction sector costs since August 2015. Despite widespread reports citing higher raw material prices, private sector companies continued to lower their average charges in November. Price discounting has now been recorded for four months running, linked to competitive pressures and efforts to secure new work.
About The Emirates NBD Dubai Economy Tracker™
The Emirates NBD Dubai Economy Tracker™, produced by Markit, is based on data compiled from monthly replies to questionnaires sent to senior executives in approximately 600 private sector companies, which have been carefully selected to accurately represent the true structure of the Dubai economy, including manufacturing, services, construction and retail.
The panel is stratified by Standard Industrial Classification (SIC) group, based on industry contribution to GDP. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month.
For each of the indicators the ‘Economy Tracker report’ shows the ‘diffusion’ index. This index is the sum of the positive responses plus a half of those responding ‘the same’. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease.
The Dubai Economy Tracker Index is a composite index based on five of the individual indexes with the following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers’ Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times index inverted so that it moves in a comparable direction. The Dubai Economy Tracker Index is comparable to the UAE Purchasing Managers’ Index.
Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.
About Emirates NBD
Emirates NBD is a leading banking Group in the region. As at 30th September 2016, total assets were AED 446 Billion, (equivalent to approx. USD 121 Billion). The Group has a significant retail banking franchise in the UAE and is a key participant in the global digital banking industry, with over 90 per cent of all financial transactions and requests conducted outside of its branches.
The bank currently has 220 branches and 985 ATMs and CDMs in the UAE and overseas and a large social media following, being the only bank in the Middle East ranked among the top 20 in the ‘Power 100 Social Media Rankings’, compiled by The Financial Brand. It is a major player in the UAE corporate and retail banking arena and has strong Islamic Banking, Global Markets & Treasury, Investment Banking, Private Banking, Asset Management and Brokerage operations.
Ratings agency Moody’s recently upgraded the bank’s long-term deposit and senior unsecured ratings to A3 and its baseline credit assessment (BCA) to ba1. In addition to the bank's strong funding and liquidity profile, the upgrade reflected the bank's improved loan quality, and its higher loss-absorption buffers.
The Group has operations in the UAE, Egypt, the Kingdom of Saudi Arabia, Singapore, the United Kingdom and representative offices in India, China and Indonesia.
The Group is an active participant and supporter of the UAE’s main development initiatives and of the various educational, environmental, cultural, charity and community welfare establishments.
For more information, please visit: www.emiratesnbd.com
About IHS Markit
IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and expertise to forge solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions.
IHS Markit has more than 50,000 key business and government customers, including 85 percent of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.
IHS Markit is a registered trademark of IHS Markit Ltd. All other company and product names may be trademarks of their respective owners © 2016 IHS Markit Ltd. All rights reserved.
For more information, please visit www.ihsmarkit.com