Manufacturing, services and real estate seen driving growth despite global challenges
With a stable business environment and overall sales and revenues meeting expectations businessmen in Dubai have moved confidently towards 2015 according to the quarterly business confidence survey of the Department of Economic Development (DED) in Dubai.
The survey, conducted during the last quarter of 2014 indicates robust economic fundamentals driven by the manufacturing, services and real estate sectors will continue to drive strong growth in Dubai despite weakening global conditions. Dubai’s Composite Business Confidence Index (BCI) stands at 138.2 points in Q4 2014, which is almost at level with the 140.6 points in Q3 2014.
The strong outlook is supported by a large number of new projects in the pipeline across all sectors. Respondents expect good business conditions over the near term, supported by the uptick in sales activity and client footfall during the winter season. Commensurate with the BCI, the outlook for sales revenue for the first quarter of 2015 is on a par with the previous year’s forecast and stands at positive 61% compared to 62% for Q4 2014.
Rising demand resulting from a strong economy coupled with buoyancy in tourist activity have bolstered the overall outlook. Expectations related to sales volumes have remained steady, both on a year-on-year basis and quarter-on-quarter basis. Those expecting a rise in their sales volumes during Q1 2015 constitute 65% in line with the corresponding period a year ago and similar to the outlook for Q4 2014. The net balance for the sales volume for Q1 2015 stands at 60% vis-à-vis 62% for Q1 2014 and 60% for Q4 2014.
With respect to selling prices, 79% of the surveyed firms indicated that they do not anticipate any change. Rise in the cost of inputs and general inflation has led to 17% foreseeing an increase in prices while four per cent anticipate a drop mainly due to competition or low demand for their products.
Mirroring the pattern observed for sales volumes, the outlook towards net profits for Q1 2015 is also in sync both on a q-o-q and y-o-y basis. Higher profits are likely to be driven by stronger sales volumes, seasonal activity, acquisition of new customers and contracts as well as an overall robust business environment.
Firms anticipating higher net profits during Q1 2015 account for 63% versus compared to 62% during Q1 2014 and 64% for Q4 2014. This converts into a net balance of positive 57% for outlook on net profits for Q1 2015 compared to corresponding net balances of 54% and 56% for Q4 2014 and Q1 2014 respectively.
Expectations with respect to the business environment are stable with 61% participants forecasting an improvement in business conditions during Q1 2015 versus 60% for the last quarter. Investment plans for capacity expansion are steady on a quarter-on-quarter basis with 70% saying they would invest in capacity expansion in Q4 2014 compared with 69% in Q3 2014.
Once again, large companies have shown a stronger outlook compared to the small and medium enterprise (SME) segment. The composite BCI for large firms is 144.6 points versus 128.5 points for SMEs. Large firms are more confident than SMEs in relation to all the parameters constituting the index i.e. sales volumes, selling prices, number of employees and net profits.
The current survey also shows that the manufacturing sector is the most upbeat in relation to sales volumes, an indicator of real economic activity, while the services sector has the strongest outlook in terms of selling prices, boosted by seasonal demand. Further, the manufacturing and services sectors are more optimistic than trading, with respect to hiring and profitability.
The composite BCI for the export sector stands at 134.7 points compared to 138.2 points for the overall business community. The net balances for expectations on volumes sold and net profits for exporters are 69% and 67% versus 60% and 57% respectively for the overall business community but the hiring and selling price indicators are similar for both groups.
Conducted in each quarter, the survey gathers feedbacks from 2,000 respondents, equally divided between the four quarters of the year. The respondents come from all major residential communities across Dubai and cover males and females as well as nationals and expatriates, aged 18 to 59.