Dubai – MENA Herald: Businesses in Dubai are buoyant on the improving demand during the winter months and the positive sentiment is largely expected to firm up further during the last three months of 2015, according to the quarterly business survey conducted by the Department of Economic Development (DED) in Dubai.
The Business Confidence Index (BCI) for the third quarter of 2015 showed an increase from 110.1 points in the second quarter to 124.8 points though the composite BCI is 15.8 points lower compared to Q3 2014.
Performance estimates driven by the cyclical upswing in demand has led to 51% of the businesses anticipating further improvement in Q4 2015 with only 8% gearing for a slump, as against a corresponding 43% and 16%, respectively, in the previous quarter. The remaining 41 per cent expect the situation to remain unchanged during Q4 2015.
Sales revenue expectations in Q3 2015 are stronger than in Q2 2015 though moderate when compared to the last year. The net balance for sales revenues for Q4 2015 stands at 49% in comparison to 29% for Q3 2015 and 62% for Q4 2014.
In a reversal of trend from the last quarter, large companies are more optimistic compared to SMEs, with composite BCI scores of 129.2 and 118.3 points respectively. However, while larger firms are more optimistic about selling prices, number of employees and net profits, SMEs hold a stronger outlook with respect to volumes sold.
Exporters have a weaker outlook compared to the overall business community, with composite BCI scores of 111.3 and 124.8 points, respectively. Domestically-oriented firms are more optimistic than exporters in term of sales revenues, selling prices, volumes, net profits, hiring and new purchase orders.
A large proportion (79%) of businesses have indicated that they do not foresee any change in their selling prices during Q4 2015, while 13% of the businesses are hopeful of higher selling prices However, growing competition has led 8% of the respondents to forecast a dip in selling prices during Q4, 2015. For Q4 2015, the net balance for selling prices stands at positive 5%, which is higher compared to positive 3% in Q3 2015.
Confidence generated by market improvements and new projects, higher demand and the seasonal increase in tourism is positively reflected on sales volume estimates, particularly in the services sector. The survey shows that 55% of the companies look forward to an increase in volumes during Q4 2015 while 9% expect a decline. The net balance for volume of sales for Q4, 2015 stands at positive 46%, higher than the Q3, 2015 level of 27%.
The net balance for net profits stands at positive 37% for Q4 2015 against 26% for Q3 2015, again driven by better business conditions, new projects, higher selling prices and improved demand. Businesses citing lower profits have indicated higher overhead expenses, competition and slow demand as the main reasons.
Hiring expectations for Q4, 2015 are modestly stronger on a quarterly basis, but are weaker on an annual basis. The net balance for number of employees for Q4 2015 is at positive 17% compared to 15% for Q3 2015 and 23% for Q4 2014.
Among key sectors, manufacturing has the weakest forecast for sales volumes, with 53% of the firms foreseeing a rise and 16%, a decrease due to market conditions, stiffening competition and stabilisation of new orders. The services sector holds the strongest forecast for sales revenues, volumes sold, selling prices, hiring, profitability and new purchase orders for Q4 2015 and within the sector, hotels and restaurants are the most optimistic with 80% of them expecting an increase.
In the transportation segment, 53% anticipate an increase in volumes during Q4 2015, while 11% forecast a decrease due to lower demand. Within the trading sector, the most optimistic segments are computers and electronics, while those dealing with auto parts and food & beverages traders are less optimistic.
Market conditions, competition, rising rental/leasing costs and delays in payments/receivables are the major challenges indicated by businesses in Dubai but 49% of the respondents do not expect any obstacles to their business operations during the fourth quarter of 2015 as against 45% in the previous quarter. For 64% of companies business expansion and/or technology upgrades continued to be a priority list in Q3 2015 much like the previous quarter.
DED conducts the quarterly surveys as an effective tool to measure the pulse of the business community and allow the government and the private sector to track and analyse major trends and issues that have a bearing on economic activity in Dubai.
The Q3 2015 (July – September), 2015 survey covered 500 companies in Dubai. The companies were asked to indicate if they anticipated an ‘increase,’ ‘decrease,’ or ‘no change’ in key indicators such as sales revenues, selling prices, volumes sold, profits and number of employees. For further information on the surveys, contact Laila Buabdulla, Head of Economic Information at DED, on +971 4 4455884.