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Fri 15 Jan 2016 10:18 AM

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Dubai private sector growth slows to weakest rate since July 2010

December data reveals significant dip in performance as business activity, new orders and employment all suffer

Dubai private sector growth slows to weakest rate since July 2010

The rate of growth in Dubai's non-oil private sector economy slowed significantly in December to its weakest rate since July 2010, according to a new survey.

The headline seasonally adjusted Emirates NBD Dubai Economy Tracker Index posted at 51.8 in December, down from 53.4 in November, and signalled only a modest improvement in overall operating conditions.

Moreover, it was the weakest rate of improvement since July 2010, with slower increases in business activity, new orders and employment all weighing on the headline index at the end of the year.

At the sub-sector level, both construction and wholesale and retail businesses saw a slower improvement in overall business conditions. However, travel and tourism firms bucked the trend, with the health of the sector improving at the fastest rate since June.

A reading of below 50.0 indicates that the non-oil private sector economy is generally declining; above 50.0, that it is generally expanding. A reading of 50.0 signals no change.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The slower rate of expansion in Dubai in December is unsurprising given the headwinds of strong US dollar and increased uncertainty about both the global and regional economic outlook.

"Nevertheless, the improvement in tourism sector activity in December is encouraging. Construction sector output also expanded at a robust pace in December, and we continue to expect this sector to be a positive contributor to Dubai’s economic growth in 2016."

The survey said business activity continued to increase across Dubai’s private sector in December, but the latest expansion was the second-weakest in 46 months.

Reflective of slower overall activity growth, private sector employment also expanded at a softer pace in December. Payroll growth weakened across both travel and tourism and construction companies, while staff numbers were broadly unchanged across the wholesale and retail sector.

December data signalled a further rise in total new orders placed at Dubai private sector companies. However, the rate of growth moderated to the weakest since November 2010, with a number of monitored firms commenting on relatively subdued market conditions and greater competitive pressures.

The level of optimism towards the 12-month business outlook also slipped in December, with Dubai’s private sector registering the lowest level of positive sentiment since this index began in April 2012.

New product launches, marketing strategies and expectations of improving market conditions were all expected to boost output over the coming year. However, some panellists commented that an uncertain global economic outlook weighed on their growth projections.