Dubai construction sector picks up – report

Construction is among the best-performing sectors of the economy heading into Q3, according to Emirates NBD index


The Dubai construction industry has gained momentum and ranks among the top three sectors in the overall economy, an Emirates NBD report has found.

According to the Dubai Economy Tracker Index, Dubai’s private sector – including construction – has made a positive start to the third quarter 2016, with overall business conditions improving at the fastest pace since March 2015.

The headline seasonally adjusted index rose from 54.6 in June to 55.9 in July, with the construction sector one of the top three performers with an index of 53.5.

Designed as a composite indicator which will provide an accurate overview of operating conditions in the non-oil private-sector economy, the index has signalled a recovery in operating conditions in each month since the series-record low seen in February 2016. In fact, the latest readings are now back above the long-run survey average, Emirates NBD said.

The three key findings from the report were that: Wholesale and retail remains the best-performing area of activity; construction and tourism were two sectors that gained momentum in July; and that growth of new work continues to accelerate from the soft patch recorded earlier in 2016.

“The improvement in the Dubai Economy Tracker index in July is consistent with the rise in the whole UAE Purchasing Managers Index last month, and is underpinned by stronger new work and output growth. The wholesale & retail sector in particular probably benefitted from holiday spending over Eid,” said Khatija Haque, head of MENA Research at Emirates NBD.

Following the decline noted in February, high levels of business activity have now been recorded for five consecutive months, with the latest expansion of the private sector the fastest since February 2015.

While wholesale and retail companies have recorded the strongest upturn in business activity, the acceleration in growth since June has been driven by steeper rises in the construction and travel and tourism sectors.

Emirates NBD said that respondents to its survey cited generally favourable business conditions, resilient client demand and competitive pricing strategies as being major factors in the upturn. Private sector companies said that they were confident about the year-ahead business outlook, although data suggested that the degree of optimism had eased since June in all three key sub-sectors.

July data also signalled that input price inflation remained softer than seen on average since the survey began in 2010. Furthermore, the latest rise in overall cost burdens was the slowest for three months, while at the same time, average charges increased by a fractional amount. However, this contrasted with a sustained period of price discounting earlier in 2016.

While the overall rise in average prices charged reflected a robust increase across the travel and tourism sector, the construction industry was one sector which reported low prices, the Emirates NBD report said.


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