Business activity in Dubai lowest since 2013

Travel and tourism are the hardest hit sectors in the private industry's slump

Downtown Dubai
Downtown Dubai

Business activity in Dubai’s private sector dropped slightly last month to its lowest level since October 2013, with the greatest slowdown seen in the travel and tourism industry, according to research by Emirates NBD and Markit.

The bank on Wednesday published its first Dubai Economy Tracker – a new monthly survey of business conditions in the Dubai non-oil private sector.

The seasonally adjusted Dubai Business Activity Index, a key part of the tracker, posted 57.2 in April, down from 60.6 in March.

Emirates NBD’s report pointed out that the index was still well above the 50.0 mark that separates business expansion from contraction, but warned it was the lowest since October 2013.

In particular, the travel and tourism sector index dropped to 52.3 in April from 55.5 in March. Construction – the best performing category monitored by the survey – fell to 59.6 from 61.9, while wholesale and retail dropped to 58.4 from 61.5.

The research showed that staff hiring patterns also slowed across Dubai’s private sector last month, with employment increases the least marked since August 2013. This was the case in all three sectors monitored by the index.

Softer new business gains were the main reason for the moderation in output growth and job hiring, Dubai private sector companies interviewed for the index said.

However, companies were optimistic about their growth prospects for the coming year, with 38 percent of firms forecasting a rise in output over the next 12 months compared to just four percent that predict a decline.

The index also pointed to positive news on inflation, with overall input price inflation little changed from the near five-year low seen in March. Both purchasing prices and salary pressures were only marginal during April, according to the report.

Khatija Haque, head of MENA research at Emirates NBD, said: “The Dubai Economy Tracker provides additional evidence that suggests a slowing in the Dubai economy since the start of this year, in line with the overall UAE Purchasing Managers’ Index.

“However, the slowdown is from a very high base with key readings still clearly in expansion territory, well above the neutral 50.0 reading.

“In particular, activity in the construction and retail and wholesale trade sectors was very strong in April, with output readings of 59.6 and 58.4 respectively.

“The travel and tourism sector showed slower growth, however, with its output index at just 52.3. This is unsurprising as the sector feels the impact of a stronger US dollar on demand from key emerging markets. Nevertheless, optimism about future activity remains high.”

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