Enjoy our faster App experience

Dubai: New business growth slows in January

Businesses in the emirate see market conditions continuing to improve in 2022

dmcc, dubai expats, dubai business, dubai work laws, dubai labour laws, uae visa
dmcc, dubai expats, dubai business, dubai work laws, dubai labour laws, uae visa

A Staff Reporter

Published: Wed 9 Feb 2022, 8:48 AM

Growth in Dubai's non-oil private sector economy was quelled by the Omicron wave of Covid-19 in January, as the latest PMI data signalled a much weaker rise in new business following December's 29-month high.

Supply chain challenges and price pressures also persisted, although firms continued to see a strong recovery in activity following looser stringency measures.

The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index (PMI) decreased for the first time in four months, from 55.3 in December to 52.6 in January. The index was nonetheless above the 50.0 neutral mark for the fourteenth consecutive month, indicating a solid upturn in business conditions across the non-oil private sector.

Output levels continued to rise at a sharp pace during January, as businesses commented on a further improvement in economic conditions from the pandemic. The expansion was led by another marked upturn in construction output, which was the joint-strongest since mid-2019. At the same time, slower expansions in the wholesale and retail and travel and tourism sectors meant that the overall increase in non-oil activity was slightly weaker than in December.

"After a strong final quarter of 2021, the Dubai non-oil economy lost momentum at the start of the year, amid a much milder rise in new work volumes that firms will hope is largely a blip due to the Omicron wave. Despite the slowdown in sales growth, business activity continued to rise at a sharp pace, although this could be further impacted in the coming months if demand does not recover quickly," said David Owen, Economist at IHS Markit.

The latest data indicated only a modest uptick in new orders during January. Several firms indicated that the rapid increase in Covid-19 cases linked to the Omicron variant had led to a drop in client demand, while others suggested that strong competition weighed on growth. Weaker expansions were recorded in all three monitored sectors, but wholesale & retail firms experienced the greatest loss of momentum.


As a result, businesses were less confident for the year ahead, as output expectations slipped to the lowest since last May. Efforts to hire new staff were also less prevalent than in December, resulting in a broadly unchanged level of employment.

Owen said firms showed additional signs of strained capacity as delayed freight arrivals and rising inflationary pressures limited stock levels and led to a further rise in backlogs of work. Higher cost burdens translated into a much softer and only marginal reduction in selling charges.

"Going forward, Dubai businesses expect market conditions to continue to improve as the pandemic hopefully has a more limited impact through 2022. However, the latest data signals that the economy is not yet immune to new waves and could also face further disruption on the supply side," added Owen.


More news from Business