The overall business activity across Dubai’s non-oil private sector economy experienced its weakest expansion in July this year since March 2012, according to a report.

The Emirates NBD Dubai Economy Tracker said contributions from all three key sub-sectors monitored by the survey softened in July.

Despite the decline in momentum, July’s survey marks five-and-a-half years of sustained output growth in Dubai’s private sector economy.

Private sector companies operating in Dubai are nonetheless still highly upbeat about their business activity prospects for the year ahead, according to the latest survey data. This in turn contributed to another rise in employment numbers in July.

Meanwhile, the latest survey suggested that pressure on margins persisted, as input costs increased over the month and average prices charged declined marginally across the private sector.
 
Sponsored by Emirates NBD and produced by Markit, the survey provides an early indication of operating conditions in Dubai. The survey covers the Dubai non-oil private sector economy, with additional sector data published for travel and tourism, wholesale and retail and construction.

Tim Fox, chief economist at Emirates NBD, said: “The softening in activity in July is in line with other anecdotal reports, and probably reflects the impact that a stronger dirham and lower oil prices may be having on private sector output and sentiment. Nonetheless at 53.1, the headline number still suggests relatively firm growth in the non-oil economy, and it is especially encouraging that despite the slowdown, firms in all three surveyed sectors remain extremely upbeat about future business activity.”

Business activity and employment
At 53.1 in July, the seasonally adjusted Emirates NBD Dubai Business Activity Index posted above the 50.0 no-change value, as has been the case in each month since February 2010. However, the latest reading was down from 55.5 in June, to signal that output growth was the slowest recorded for just under three-and-a-half years and only moderate overall. Construction remained the best performing broad area of activity in July, while travel and tourism and wholesale and retail saw only marginal rises in business activity.

Staff numbers rose across the Dubai private sector as a whole in July, which continued the upward trend seen in each month since January 2012. Although the rate of job creation eased since June, the latest expansion was still the second-fastest seen over the past five months.  

Incoming new work
July data highlighted a solid upturn in new work received by Dubai private sector companies, led by strong growth in construction and wholesale and retail sectors. That said, the overall pace of new business expansion moderated over the month to its least marked since December 2010. Some survey respondents commented on more cautious spending patterns among clients, although there were also reports that competitive pricing strategies and new marketing initiatives had helped to support new business volumes.

Private sector companies in Dubai retain a strong degree of positive sentiment towards the outlook for business activity over the year ahead, despite the level of confidence moderating from June’s 19-month high. Anecdotal evidence highlighted the launch of new projects at their units and expectations of improved underlying market conditions.

Input costs
Average prices charged by Dubai private sector companies declined for the sixth month running in July, although the latest fall was only marginal and the slowest seen over this period. Reduced charges reflected a combination of competitive pressures and efforts to stimulate demand. Meanwhile, there was a squeeze on operating margins in July as input prices increased at the fastest pace since February. Nonetheless, the rate of cost inflation remained subdued in comparison to the survey’s long-run trend. -TradeArabia News Service