Momentum in Dubai’s non-oil sector slowed in April, even as the emirate’s real estate market remained stable, according to a survey released by Emirates NBD.
A newly launched monthly tracker modelled on the countrywide Purchasing Managers’ Index, which polls sentiment among business leaders on the state of the economy, the Emirates NBD Dubai Business Activity Index posted a score of 57.2 in April – with any score above 50 implying an expansion in economic activity.
This was a decrease compared to Dubai’s March score of 60.6, indicating that the emirate’s economy grew somewhat less quickly at the beginning of the second quarter than it had in preceding months.
Dubai’s economy is likely to suffer as low oil prices eat into the spending power of the region’s residents and businesses, economists believe. Despite being highly diversified away from oil, Dubai is susceptible to the impact of low global growth on softer trade and logistics demand, while a strong currency has decreased the attractiveness of Dubai’s exports and investing in the emirate’s real estate.
Businesspeople said that increasing “risk aversion among clients” was a key reason for the slowdown in activity, as uncertainty over the outlook for oil affected decision-making.
Wages rose 6.3 per cent in the UAE in 2014 – just about keeping pace with rises in the cost of living as higher rents pushed up inflation in Abu Dhabi and Dubai, according to new data from Gulf Talent, the employment site.
The construction, telecoms and logistics sectors had the highest increases in wages last year, the report said.
Across the economy, prices rose by 3.1 per cent in 2014, according to figures from the National Bureau of Statistics, but the official figure probably understates the impact of rent rises on the overall price level, economists believe.
The real estate sector, which accounts for a significant percentage of the Dubai economy, experienced slight increases in inquiries and property values, according to Emirates NBD data.
“Robust domestic demand, especially for apartments, helped to support sales volumes and offset weaker external demand during the three months to April,” said Khatija Haque, the head of Mena research at Emirates NBD.
The real estate consultancy JLL expects rents to remain flat or fall by up to 10 per cent by the end of the year.
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