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Dubai business conditions show 3-year high upturn

Businesses saw a further recovery in sales although cost pressures quickened across the non-oil economy, driven by ongoing volatility in global energy markets, says the latest PMI survey report from S&P Global.

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Dubai’s business conditions showed a three-year high improvement in May on the back of a strong rebound in the travel and tourism sector, according to a survey.

Businesses saw a further recovery in sales although cost pressures quickened across the non-oil economy, driven by ongoing volatility in global energy markets, says the latest PMI survey report from S&P Global.

The S&P Global Dubai Purchasing Managers’ Index (PMI) picked up to 55.7 in May, up from 54.7 in April, and indicated a robust improvement in the health of the non-oil private sector. In fact, the latest reading was the highest since June 2019, said the report.

David Owen, an economist at S&P Global Market Intelligence, said the PMI data for the Dubai non-oil economy had two prominent findings. First is that global energy market volatility drove cost inflation to an over four-year high; and secondly, a fast-recovering tourism sector is now masking weak performances in the rest of the economy.

In the first four months of 2022, Dubai’s tourism sector continued to recover fast after the Covid-19 pandemic as the Emirate recorded a massive increase in arrivals. According to the Dubai Media Office, the number of visitors to the city reached 5.1 million in January-April 2022, registering a major increase of 203 per cent. The increased flow of tourists helped improve hotel occupancy across the emirate, which reached 76 per cent during the period.

Dubai received almost four million international overnight visitors between January and March 2022, a huge year-on-year growth of 214 per cent. The city also ranked No.1 globally in hotel occupancy in the first quarter of 2022, with 82 per cent.

Own said travel & tourism was the only sector to see an acceleration in growth in terms of new orders in May, rising to the quickest pace for nearly three years. “By comparison, wholesale & retail growth eased to a three-month low, while construction recorded the first decrease in new work since last September, as both businesses and households battled with rising inflationary pressures.

“The uplift in input costs also placed further pressure on firms’ margins, amid additional reports of charge discounting. This contributed to a more subdued outlook for future activity, which slipped to the lowest in one year,” said Owen.

The pace of inflation in the non-oil economy quickened to the fastest in just over four years, as firms particularly noted the impact of rising fuel prices due to the war in Ukraine, said the PMI report. Other items such as steel, aluminium, chemicals and timber were also cited as up in price. While firms attempted to pass these costs onto customers, overall output charges decreased for the eleventh straight month in May.

According to survey panellists, strong competitive pressures continued to drive selling prices lower, though the overall reduction was only modest. Meanwhile, survey data indicated a further marked increase in non-oil business activity during May.

“Companies signalled that rising new order volumes and ongoing project work were behind the expansion, which was the second-fastest in nearly three years. Supporting the rise in output, firms expanded their workforce numbers during the month, following a slight reduction in April. While only marginal, the pace of job creation was the fastest in 2022 so far,” it said.

Looking ahead, businesses were notably less confident of a rise in activity over the coming year in May, as inflation fears weighed on expectations of sales growth. In fact, the degree of optimism slipped to the weakest since May 2021, said the report.

— issacjohn@khaleejtimes.com