Dubai business optimism soars even though non-oil economy slows in October

Travel and tourism weighed down growth last month while there was strong expansion in the construction sector

The under-construction Mohammed bin Rashid Library in Dubai. The construction sector in the emirate expanded in October. Chris Whiteoak / The National

Dubai's construction activity improved in October as business optimism rose to the highest level since 2012, signalling an uptick in the emirate’s non-oil private-sector economy, although the rate of economic expansion fell to a 31-month low.

The seasonally adjusted Emirates NBD Dubai Economy Tracker Index fell to 52.5 in October, down from 54.4 in September, the weakest figure since March 2016. However, the composite indicator, which gives an accurate overview of operating conditions in the non-oil private-sector economy, remained above the critical 50-mark last month, stretching the current phase of expansion to 32 months, Emirates NBD said on Sunday.

A reading below 50 indicates that the economy is declining, and above 50 it is expanding. A reading of 50 signals no change.

Slow improvements in activity and new work, alongside another contraction in employment, contributed to the slowdown, according to the latest data.

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“Both output and new orders across the whole of Dubai’s private sector increased in October, but at markedly slower rates. Output growth was the weakest year-to-date, while new order growth was the slowest since April 2016,” said Khatija Haque, the head of Middle East and North Africa research at Emirates NBD. “Despite the soft survey data, firms in Dubai were the most optimistic than they have been since at least 2012, with nearly 77 per cent of respondents expecting their output to be higher in a year’s time.”

The employment index remained in contraction territory for the second month in a row, as more companies reported a decline in headcount than those reporting an increase. However, the vast majority of companies surveyed reported no change in job numbers last month.

Travel and tourism was the weakest performing sector in October at 49.6, followed by wholesale and retail at 53.7. The construction sector, however, bucked the trend, posting a stronger expansion rising from 53.8 in September to 55.5 in October.