Private-sector activity still high in Dubai’s economy in August

The purchasing managers' index dropped a bit but remained near 17-month highs last month.

Private sector activity in Dubai remained close to 17-month highs in August as output and new orders rose and business expectations improved.

The UAE purchasing managers’ index (PMI), an indicator for Dubai’s non-oil growth, dipped in August compared to July, when there was an especially strong reading, falling to 55.7 last month from 55.9 in July, said Emirates NBD.

The Dubai bank sponsors the monthly survey of business conditions in the UAE’s non-oil private sector by Markit, a financial information services company. A reading above 50 indicates that the non-oil economy is growing, while a reading below 50 suggests that it is contracting.

“After a strong reading in July, it is unsurprising to see a slightly softer Dubai Economy Tracker index in August,” said Khatija Haque, head of Mena research at Emirates NBD.

“Output and new orders still increased sharply last month, partly due to more aggressive price discounting by firms. Businesses also appear to be more optimistic about the coming months, which is encouraging.”

The bank said the three main sectors that are gauged for the report, wholesale and retail, travel and tourism, and construction all showed buoyant readings at 55.5, 54.7 and 52.6 respectively. Those surveyed said strong sales growth in Aug­ust was supported by improving economic conditions and strategies to offer discounts to stimulate demand.

While sales have improved, the data collected indicated a very small increase in private sector employment and that the rate of new jobs remained slower than the survey’s average since it began in 2010.

Since the end of 2014, the UAE economy has suffered from an oil price freefall, prompting cuts in public spending and falling consumer demand. The price of oil has dropped by as much as 70 per cent since June 2014 as slowing global growth reduced demand for energy and production increased in the US as unconventional oil and gas extraction, known as fracking, boomed.

On Monday, the index for the UAE showed business activity growth also slowed slightly for the country as a whole in Aug­ust, also after a strong July.

Emirate NBD’s results chimes with other independent research conducted on the UAE economy in recent months.

Consumer confidence in the UAE improved in the second quarter, reversing a decline in the previous three months, a new survey showed.

The second-quarter confidence score for the UAE rose by five points to 109, after declining four points in the previous quarter, the global information company Nielsen said.

The outlook for job prospects advanced by nine percentage points, while the personal fin­ance sentiment gained six percentage points, it said.

“Market dynamics have not changed significantly, and consumers were cautiously optimistic about spending intentions,” said Arslan Ashraf, the managing director of Niel­sen UAE. “They continue to be prudent with their expenses, especially when it comes to spending on new clothes, out-of-home entertainment and out-of-home dining.”

That overall pick-up in demand, however, also helped to improve Dubai’s Department of Economic Development’s Business Confidence Index by 7.4 points to 117.5 during the second quarter compared with a year ago.

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