Dubai business conditions remain largely unchanged in October

By Rahul Vaimal, Associate Editor
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According to the October PMI (Purchasing Managers Index) survey released recently, business conditions were broadly unchanged over the month across the non-oil private sector in Dubai.

Companies have seen only a marginal increase in new job opportunities, while job shedding has accelerated since September, but has remained softer than in the previous six months. Most notably, since this index started in April 2012, the degree of positive sentiment regarding the year-on-year outlook for activity has dropped to its lowest.

The IHS Markit Dubai PMI is derived from individual diffusion indices that measure output changes, new orders, employment, delivery times of suppliers and stocks of purchased goods. The survey covers the non-oil private sector economy of Dubai, with additional data published for travel & tourism, wholesale & retail and construction sector.

The seasonally adjusted PMI indicated in Dubai’s non-oil private sector recorded the slowest output growth in five month. The reading also signaled an end to the growth cycle observed throughout the third quarter of the year, falling from 51.5 in September.

In October, businesses in Dubai reported the weakest increase in activity in the last five months of growth, partly due to a softer, and only marginal, upturn in new orders. Some businesses noted that they could not expand further while markets remained subdued. In both travel and tourism and construction, additional sector data showed falls in output.

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David Owen
IHS Markit

“After a robust quarter of growth for the Dubai non-oil economy, October data pointed to a more subdued picture as overall business conditions were left broadly stable. Businesses also showed weaker optimism towards the economic recovery from Covid-19, amid reports of weak demand and uncertainty about the future impact of the pandemic on activity and jobs. In fact, the overall level of confidence was the weakest in the series’ eight-year history.”

“Output levels declined in the construction and travel & tourism sectors, mostly due to a lack of new building projects and weak tourist numbers. Growth in the wholesale & retail sector was the softest in five months, signaling a broad-based slowdown across some of Dubai’s key sectors,” he added.

Output expectations dropped to the lowest on record in October with the recovery fading, and uncertainty building about the future impact of the pandemic. In the next 12 months, firms still expect an increase in activity, but the degree of positivity was only fractional.

In October, meanwhile, job numbers throughout the private sector economy decreased. As of September, the rate of contraction gained pace, but it was the second-weakest in the past eight months. Where job cuts have been noted, this is often linked to cost-cutting measures by companies.

On the price front, the most recent data showed a broadly unchanged level of expenditure at the beginning of the fourth quarter. As output charges dropped for the thirtieth month running, margins came under further pressure, amid reports of companies offering discounts to clear stocks and improve sales. The discount rate was the lowest since May.

In October, as lead times extended at the fastest rate since May, Dubai companies highlighted renewed supply chain issues. The key factors leading to longer delivery times were customs delays and shortages of some inputs. Having said that, delays were much weaker than those seen in the earlier months.