Dubai’s private sector activity grew at slower pace in August

Dubai: Business activity in Dubai’s non-oil private sector economy increased at a softer rate in August compared to July, as companies reported weaker new order growth, according to IHS Markit Dubai Purchasing Managers’ Index (PMI).

Data from the survey that covers the Dubai non-oil private sector economy with additional sector data published for travel & tourism, wholesale & retail and construction showed employment fell marginally, while the business outlook slipped. More positively, output prices were broadly unchanged after 15 successive months of discounting.

“Growth in Dubai’s private sector economy, as suggested by the PMI, eased in August, with the headline reading dropping to a three-and-a-half year low and only signalling a modest uplift in business conditions. Demand growth was notably softer, leading firms to raise activity at a below-average pace and reduce workforce numbers slightly,” said David Owen, Economist at IHS Markit.

The seasonally adjusted PMI fell from 55.2 in July to 51.7 in August, the lowest reading since February 2016. Overall, this signalled only a modest uplift in non-oil private sector operating conditions.

The slowdown was mostly reflected in the wholesale & retail and construction sectors, with the latter posting the weakest improvement in business conditions for three-and-a-half years. The travel & tourism sector also saw an easing in growth, albeit only marginally.

Output levels in the non-oil private sector were up sharply during August, although the rate of expansion was the weakest for over three years. Companies often related this to a softer increase in new business, which rose at the slowest rate since last October. Competitive pressures led to an easing in new order growth, according to respondents.

Businesses looked to reduce employee numbers in August, with some citing ongoing cost-cutting measures. The rate of workforce reduction was only marginal, however.

Intense competition for new work had previously led firms to lower output charges in each of the past 15 months. However, August data revealed that prices were broadly unchanged.

Meanwhile, average input prices recorded a renewed increase in August, with firms largely linking this to higher raw material costs. That said, the rate of inflation was marginal and below the trend for the series.

Looking ahead, the outlook for future activity among businesses in Dubai’s non-oil private sector deteriorated in August. However, aA majority of respondents remained optimistic though, with many hoping for a greater volume of clients and sales.

“Future output expectations dimmed but remained relatively strong. With the Expo 2020 coming next year, firms were still optimistic that activity will expand. Further positivity was also noted on the price front, as selling prices were close to stabilisation during August after 15 consecutive months of discounting,” said Owen.