Dubai private sector growth turns negative for first time in 6 years

Emirates NBD Dubai Economy Tracker Index shows overall operating conditions deteriorated in February

Private sector companies based in Dubai signalled the first deterioration in overall operating conditions since data collection began in 2010 during February.

At 48.9, the headline seasonally adjusted Emirates NBD Dubai Economy Tracker Index was down from 50.7 at the start of 2016 and signalled a marginal deterioration in the health of the sector. 

Sub-sector data indicated that travel and tourism companies noted the fastest deterioration in business conditions. The health of the construction and wholesale & retail sectors also deteriorated, albeit at marginal rates.

A reading of below 50.0 indicates that the non-oil private sector economy is generally declining. 

Khatija Haque, head of MENA Research at Emirates NBD, said: “The Emirates NBD Dubai Economy Tracker reading in February highlights the challenges faced by Dubai’s external-oriented service-based economy.

"Uncertainty about global economic growth, volatility in financial markets and low oil prices have weighed on sentiment and activity, while tourism and retail trade has also been affected by a strong US dollar.”

February data signalled a renewed decline in overall business activity across Dubai’s private sector. Though only modest, it was the first time that activity had fallen since January 2010.

All three key sub-sectors noted modest declines in activity during February, led by travel and tourism companies. Anecdotal evidence generally linked reduced business activity to weaker market conditions and fewer new orders.

The survey said Dubai private sector companies raised their workforce numbers only slightly in February, as has been the case in each of the past three months. A number of monitored businesses mentioned that staff hiring had been dampened by softer growth in new work.

Latest survey data also signalled a reduced amount of new business in Dubai’s private sector during February. Though only slight, it was the first time that new orders had declined in just over six years of data collection.

Companies that reported lower new business generally commented that an uncertain global economic outlook and falling oil prices had made clients more unwilling to commit to spending.

Despite a gloomier overall economic picture, Dubai private sector firms expressed an improved level of optimism towards the one-year business outlook in February. That said, the overall degree of positive sentiment remained weak in the context of historical data. At the sub-sector level, business confidence improved across travel and tourism and wholesale and retail.

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