Growth in non-oil activity in Dubai accelerated again in August, reaching its highest level in nearly two years, and continuing a series of strong improvements in business conditions during the third quarter of this year, as a result of which companies increased employment levels at the fastest rate. Since November 2019.
Meanwhile, despite rising input costs, uncertainty about the stability of customer demand led Dubai companies to cut production prices for the next month in a row.
The seasonally adjusted Purchasing Managers’ Index (PMI) of IHS Markit Group to monitor the movement of the economy in Dubai rose from 53.2 points in July to 53.3 points in August, indicating a new strong improvement in operating conditions in the non-oil sector. Moreover, the index did not register A reading higher than this only once in the past 21 months, in the month of April 2021.
One of the main components of the PMI, the production index, jumped to its highest reading since September 2019 in the capacity of the latest study, to indicate a sharp expansion in non-oil production, and in cases of increased activity, the majority of companies linked that improvement in business volumes. However, the pace of growth in new orders has slowed slightly since the start of the third quarter.
Sector data indicated that growth was particularly driven by the travel and tourism sector in August, as companies saw the largest increases in activity and new business in more than two years, as the easing of travel restrictions led to an influx of tourists, and production growth among construction companies was strong. It accelerated to its highest level in 13 months.
Non-oil companies recorded another increase in employment levels in the middle of the third quarter, in fact, job creation accelerated to its highest level since November 2019, as companies sought to rebuild staff capabilities in response to increased sales volumes and backlogs.
Purchasing activity and inventories also witnessed increases during August, and the latter witnessed a renewed increase since July, at the same time, the length of delivery dates increased for the seventh consecutive month, but the contraction was the weakest in this series, and it was only marginal.
Input cost pressures continued to rise in the last study period, largely caused by increased purchase prices, and in particular, companies commented on increases in fuel, raw material (such as steel) prices and freight rates. However, as non-oil producing companies once again cut their production prices in an attempt to retain customers and win new contracts, the pace of discounting accelerated from July to the fastest in five months, but remained slower than the average recorded in 2020.
Companies were slightly more confident about future production in August compared to the previous three months, and participating companies with positive expectations indicated expectations of increased new business arising from Expo 2020, the easing of Covid-19 restrictions and the ongoing vaccination program.
David Owen, an economist at IHS Markit Group, said: “Dubai’s non-oil economy enjoyed another strong overall improvement in August driven by a notable rise in production levels, which was the fastest since September 2019. This indicates that the economy is consolidating its recovery from the pandemic. Especially that the easing of travel procedures led to an increase in the number of tourists and an increase in consumer demand.
He added: “Dubai will also benefit from Expo 2020 later this year, which companies hope will drive spending and growth higher, and with this in mind, companies increased their employee numbers in August, which led to the largest increase in Employment since late 2019.
The Purchasing Managers’ Index (PMI) of the IHS Markit Group to monitor the movement of the economy in Dubai is an indicator derived from individual diffusion indicators, which measures changes in production, new orders, employment, delivery dates of suppliers and stocks of purchased goods. The study includes the non-oil private sector economy in Dubai, with additional published sectoral data. Regarding the tourism, travel, wholesale, retail and construction sectors.
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