(Bloomberg) — Dubai’s latest growth spurt is coming with a sharp discount.
Business conditions in the emirate’s non-oil private sector improved at the fastest rate in over four years in April as companies led by wholesalers and retailers offered lower prices to win orders, the seasonally adjusted Emirates NBD Dubai Economy Tracker Index showed on Thursday.
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The gauge rose to 57.9 from 57.6 in March, edging further above the threshold of 50 that separates contraction from growth. The 12-month outlook for activity climbed to the strongest since the data series began in 2010.
“This growth in the volume of activity appears to be underpinned by price discounting, rather than an improvement in underlying demand,” said Khatija Haque, head of Middle East and North Africa research at Dubai’s biggest bank. “As a result, firms are reluctant to boost hiring and consumers are likely to remain cautious.”
The reliance on price discounts and promotions highlights the fragility of Dubai’s economy after notching its weakest expansion in almost a decade in 2018. Growth is set to accelerate this year and next before slowing in 2021, according to projections released last month by the city’s department of economic development.
Other highlights from the report:
- Incoming new business surged at the fastest rate since January 2015 in April; new sales growth at wholesalers and retailers reached a record high Prices charged for goods and services slumped at the fastest rate since last November, dropping for the 12th month running.
- Discounting was “notably strong” in the wholesale and retail as well as construction industries.
- Travel and tourism also improved after companies reduced charges while construction witnessed its strongest discounting since February 2017.
- The improving prospects aren’t enough to convince all employers to hire.
- Jobs declined in the construction and travel and tourism sectors, and “rose only slightly” in wholesale and retail