Dubai’s business conditions improve at slow pace in February

Overall fall in the PMI largely stemmed from a slowdown in new business growth


Issac John

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Published: Thu 9 Mar 2023, 3:45 PM

Dubai’s business conditions improved in February at the slowest rate for 12 months amid waning new order expansion, signalling further softening across the non-oil sector.

The headline S&P Global Dubai Purchasing Managers' Index dropped to 54.1 in February from 54.5 in January, indicating a robust improvement in the health of the non-oil sector, although it was at its lowest reading since February 2022.

However, Dubai’s booming property sector, brightening prospects for tourism and hospitality business on the back of fast-recovering air travel traffic and the city’s growing investor appeal bode well for the non-oil sector in the medium to long term, according to analysts.

"The Dubai PMI followed its recent trend of showing growth coming off the boil, as the headline index dropped to a 12-month low of 54.1 in February. That said, the reading was still indicative of a robust performance for the non-oil sector, as new orders and activity continued to rise sharply,” said David Owen, senior economist at S&P Global Market Intelligence.

According to S&P report, the overall fall in the PMI largely stemmed from a slowdown in new business growth. “In fact, new orders rose to the least extent since the beginning of 2022, though the rate of growth was strong overall. While many companies continued to see demand increase, others reported that competitive pressures had weighed on sales. Subsequently, non-oil companies registered slower increases,” it said.

Four of the five sub-components of the PMI had a downward influence in February, partly offset by a mark-up in the Output Index. Indeed, this index picked up to a four-month high and signalled a robust expansion in non-oil business activity in February, the survey report said.

Firms largely attributed this to new clients and ongoing projects. The construction sector registered its strongest upturn in output since June 2019, while wholesale & retail and travel & tourism both saw faster increases in activity compared to January.

Non-oil companies registered slower increases in both employment and inventories during February. Job creation was only mild overall and the softest seen for five months, whilst stock levels grew to the least extent in the present seven-month run of expansion, the PMI report said. Renewed price pressures were also recorded, although supply chain conditions improved notably, and output expanded at the sharpest rate in four months.

While new order growth slipped to a 13-month low, output growth picked up from January and remained well above the survey trend. "Businesses were also more optimistic towards future output in February, reflecting confidence that demand conditions will continue to improve and avoid disruption from a weaker global economic climate. In addition, firms saw supplier delivery times improve sharply, with this index picking up to its highest level in three-and-a-half years," said Owen.

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