Private sector businesses in Dubai signalled further strong increases in business activity and new orders in June, though the rates of expansion moderated to 27- and 53-month lows, respectively.

According to the latest Dubai Economy Tracker published by Emirates NBD bank, despite softer increases in activity and new work, Dubai private sector companies were increasingly optimistic towards the year-ahead, with the degree of positive sentiment reaching a 19-month high.

Further, increased confidence towards the business outlook underpinned the strongest increase in employment since October 2014, it noted.

At the sub-sector level, construction companies posted the strongest increases in business activity, new orders and employment. Travel & tourism firms bucked the wider slowdown in June, signalling the fastest rise in activity for three months.

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 & tourism, wholesale & retail and construction.

"The survey points to robust growth in Dubai's economy in June, with all the key sectors surveyed reporting increased output and new work. The high level of business optimism bodes well as we head into the second half of this year,” said Tim Fox, Chief Economist at Emirates NBD.

The seasonally adjusted Emirates NBD Dubai Business Activity Index posted at 55.5 in June, down from 57.6 in May, although still above the 50 no-change mark. However, it was the lowest index reading seen since March 2013 and was slightly weaker than the series average (57.6).

Sub-sector data suggested that construction companies continued to lead growth, with the respective index posting at 57.9 in June (down from 62.7 in May). Travel & tourism firms meanwhile saw activity growth rebound slightly (index up from 54.1 to 55.3), while wholesale & retail companies recorded a weaker rate of growth (index down from 56.5 to 54.9). Meanwhile, private sector employment in Dubai expanded at the strongest rate in eight months.

Dubai private sector companies saw a further steep increase in new business during June. That said, the rate of expansion edged down since May to the slowest recorded since January 2011. According to respondents, greater competition for new work and relatively subdued client demand restricted growth of new orders. Sub-sector data indicated that new business expanded at slower rates at construction and wholesale & retail companies, while growth picked up at travel & tourism firms.

Despite the slowdown in incoming new work, Dubai private sector firms felt strongly optimistic towards 12-month business outlook in June. Further, the degree of positive sentiment was the strongest seen in over a year-and-a-half, with a number of companies attributing optimism to forecasts of improving client demand, planned company expansions and new projects.

Latest survey data pointed to a modest rise in total input costs in June. Further, the rate of inflation remained far slower than the survey average, despite picking up for the third month in a row. However, increased competitive pressures led companies to discount their output charges again in June, albeit marginally. Selling prices fell across all three key sub-sectors, with wholesale & retail companies registering the strongest rate of discounting.
Source: Emirates 24/7