Dubai’s non-oil sector sees fastest growth since 2019
JOBS GREW AT FASTEST RATE LAST MONTH SINCE NOVEMBER 2019
The pace of growth in non-oil activity across Dubai accelerated again in August, reaching its highest level for almost two years, according to the Purchasing Managers’ Index (PMI) by IHS Markit.
The report showed Dubai’s economy continued its run of solid improvements in business conditions over the third quarter of the year. As a result, firms increased their employment levels at the fastest rate since November 2019.
“The Dubai non-oil economy enjoyed another strong overall improvement in August, driven by a marked rise in output levels that was the fastest seen since September 2019. This suggests that the economy is solidifying its recovery from the pandemic, especially as a relaxation of travel measures drove tourism numbers higher and boosted consumer demand,” said David Owen, Economist at IHS Markit.
The headline PMI ticked up from 53.2 in July to 53.3 in August, signalling another solid upturn in operating conditions in the non-oil sector. Moreover, the index has registered higher only once in the last 21 months, in April 2021.
One of the key components of the PMI, the Output Index, jumped to its highest reading since September 2019 in the latest survey period, to signal a sharp expansion in non-oil output.
Meanwhile, despite a rise in input costs, uncertainty about the stability of customer demand led Dubai companies to discount their output charges for the second month running.
One of the key components of the PMI, the Output Index, jumped to its highest reading since September 2019 in the latest survey period, to signal a sharp expansion in non-oil output.
Broad-based recovery
Firms linked increase in activity to improving new business volumes as the economy recovered from the pandemic. That said, the overall pace of new order growth eased slightly since the start of the third quarter.
Sector data suggested that growth was particularly driven by the travel & tourism category in August, with businesses seeing the sharpest increases in activity and new work in over two years as looser travel restrictions drove an influx of tourist numbers. Output growth among construction firms was also strong, having accelerated to a 13-month high. Non-oil companies reported a further increase in staffing levels midway through the third quarter. In fact, the pace of job creation quickened to the most marked since November 2019, as firms looked to rebuild staff capacity in response to greater sales volumes and backlogs of work.
Expansions were also recorded in purchasing activity and inventories during August, with the latter seeing a renewed increase since July. Delivery
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times meanwhile lengthened for the seventh consecutive month, although the downturn was the weakest seen in this sequence and only marginal.
Input cost pressure
Input cost pressures continued to tick higher in the latest survey period, largely resulting from an increase in purchase prices. In particular, firms commented on rises in fuel, raw material (such as steel) and freight prices.
Non-oil companies again lowered their output prices in a bid to retain clients and win new contracts. The pace of discounting quickened from July to the fastest in five months, but remained slower than the average recorded in 2020.
Firms were slightly more confident regarding future output in August compared to the prior three months. Respondents with a positive outlook cited expectations of increased new business arising from Expo 2020, easing Covid-19 restrictions and the ongoing vaccination programme. “Dubai will stand to gain from the Expo 2020 later this year, which businesses hope will drive spending and growth even higher. With this in mind, firms expanded their staff capacity in August, leading to the sharpest rise in employment since late2019,” said Owen.