Dubai’s private sector keeps up growth momentum

Dubai: Non-oil private sector economic activity continued to keep up strong growth momentum in June with the headline Dubai Economy Tracker (DET) index at 58.4 but remains near the four-year high recorded in May at 58.5.

Underlying data showed the rising output failed to generate higher employment, with staffing broadly unchanged since May. This continued the weak overall trend in the labour market seen over the past year-and-a-half. The employment index dipped to 49.9 in June, the lowest reading since February, despite the strong growth in the volume of activity recorded last month, as firms remain reluctant to boost headcount.

Output and new work rose sharply again last month, and while the selling price index remained in contraction territory, the rate of price discounting in June was slight. The survey data suggests that Dubai’s non-oil economy grew at the fastest rate since early 2015 in the second quarter of 2019.

“There was little change in the June survey relative to May, but the data for Q2 2019 points to a sharp acceleration in Dubai’s economy in the second quarter of this year, with the average DET index reading at the highest level since Q1 2015. However, this growth in the volume of output has been on the back of continued price discounting and as a result is not translating into more jobs or higher salaries in the private sector. Nevertheless, the survey data so far this year supports our view that Dubai’s GDP growth is likely to be faster this year compared with 2017 and 2018,” said Khatija Haque, Head of MENA Research at Emirates NBD.

Sector-wise data showed the wholesale and retail sector index eased to a still high reading of 59.9 in June, reflecting slightly softer growth in new work last month. The output index was broadly unchanged from May, and the rate of price discounting was the weakest in nearly a year, suggesting relatively robust demand. The Eid Al Fitr holiday was longer this year than it was in 2018 and may have helped boost retail demand at the start of June. Despite the sharp rise in activity and new work in June, employment in the sector was only marginally higher, with just 1 per cent of firms indicating increased hiring last month, the least since December 2018.

The travel and tourism sector index slipped to 58.9 in June, but remains near the record high posted in March (59.8). Overall, the average for Q2 2019 was the highest since the survey began in 2015, which suggests the sector saw the fastest growth in more than four years in the second quarter of 2019. Selling prices in the sector declined for the third month in a row, albeit only fractionally. Moreover, employment in this labour-intensive service industry remained in contraction territory all through Q2 2019.

Output of the construction sector rose at a record pace in June, which helped to push the headline index to a seven month high. “We had expected, and continue to expect, strong output growth from the construction sector this year and H1 2020, as contractors aim to finish projects before Expo 2020. What has been more surprising for us is the recent (Q2 2019) acceleration in new orders, which again rose at a faster rate in June 2019,” said Haque.

Selling prices declined for fourth month in a row, which may have contributed to the rise in new work. However, despite a rebound in new work and a sharp rise in activity in June, employment in the construction sector declined for the third month in a row.