Dubai firms report uptick in new work, but overall activity slows

Web Report/Dubai
Filed on November 9, 2020

Job shedding remains softer than in previous six months, IHS Markit PMI says

The non-oil private sector in Dubai registered the slowest output growth in five months, according to the October PMI (Purchasing Managers’ Index) survey released on Monday.

Firms saw only a marginal rise in new work opportunities, while job shedding quickened from September, but remained softer than in the prior six months. Most notably, the degree of positive sentiment regarding the year-ahead outlook for activity fell to its lowest since this index began in April 2012.

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

At 49.9 in October, the seasonally adjusted PMI indicated that business conditions across the non-oil private sector were broadly unchanged over the month. Falling from 51.5 in September, the reading also signalled an end to the run of growth observed throughout the third quarter of the year.

Businesses in Dubai reported the weakest rise in activity in the last five months of expansion during October, which was in part due to a softer – and only marginal – upturn in new orders. Some companies noted they were unable to expand further whilst markets remained subdued. Additional sector data showed falls in output in both travel and tourism and construction.

"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,” said David Owen, economist at IHS Markit.

"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, signalling a broad-based slowdown across some of Dubai’s key sectors," he added.

With the recovery fading, and uncertainty building about the future impact of the pandemic, output expectations fell to the lowest on record in October. Firms still expect a rise in activity in the coming 12 months, but the degree of positivity was only fractional.

Meanwhile, job numbers decreased across the private sector economy in October. The rate of contraction gathered pace from September, but was the second-weakest in the past eight months. Where job cuts were noted, firms often linked this to cost-cutting measures.

On the price front, latest data signalled a broadly unchanged level of expenses at the start of the fourth quarter. Margins came under further pressure as output charges fell for the thirtieth month running, amid reports of firms offering discounts to clear stocks and improve sales. The rate of discounting was the least marked since May.

Dubai businesses highlighted renewed issues with supply chains in October, as lead times lengthened at the quickest rate since May. Customs delays and shortages of some inputs were key factors leading to longer delivery times. That said, delays were much weaker than those seen during the spring.


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