Dubai's business upturn belies traditional summer lull

Dubai’s business activities in July belied the traditional summer lull by recording a resounding expansion across the wholesale & retail, travel & tourism, and construction sectors.

The latest purchasing managers index (PMI) by S&P Global shows a sharper overall improvement in business conditions. In July, the Dubai PMI rose to 56.4 in July from 56.1 in June, underscoring the resilience of the non-energy private sector economy by showing the best performance since June 2019.

Living up to its reputation as the world's most resilient city, a recognition given by the United Nations, in the first half, Dubai issued 45,653 new business licences, an annual jump of almost 25 per cent, reflecting underlying strong business sentiment in the post-Covid era. The growth comes on the back of the government's strategic approaches and policy amendments that have revitalised the emirate’s economy and stimulated a strong flow of local and foreign investment.

The latest PMI data reflects Dubai’s dynamic entrepreneurial landscape, its globally competitive offerings for businesses, and the confidence that local, regional and global investors have in its growth prospects, business analysts said.

David Owen, an economist at S&P Global Market Intelligence, said Dubai's non-oil private sector registered the fastest rise in output in three years in July, supported by another solid increase in new business and promotional activity.

"Input price inflation remained among the fastest on record despite slowing from June's 53-month high. Fuel prices again impacted firms' costs, notably in the travel & tourism sector where input prices rose the most since this index began in 2015,” said Owen.

The PMI survey also indicates an easing of cost inflationary pressures after June had seen the fastest rise in input prices in nearly four-and-a-half years. Non-oil private sector growth has strengthened five times in the past six months, and the PMI remained above its long-run average of 54.5 in the latest period.

While most firms reported successful marketing activities, including promotions, and discounting to stimulate sales, travel & tourism firms reported the fastest rise in prices charged since March 2017. Despite the growth of new business receipts easing from June's near-three-year high, it was still a sharp expansion overall in July, the PMI report said.

July’s job creation rate was the joint fastest registered in 2022 so far. The month’s data also suggested longer average supply chain lead times for non-energy private sector firms, marking the first deterioration in vendor performance since December 2021, contributing to a renewed decline in input stocks, the report said.

Market observers believe that the outlook for Dubai’s retail sector has been improving steadily over the past months. Data from the Dubai Chamber of Commerce and Industry forecasts that UAE retail sales will grow by 6.6 per cent annually to reach Dh258 billion by 2025. After two years of economic uncertainty, retail is on an upward trajectory driven by increased consumer spending.

Observers predict that the total household spending would grow to Dh463.3 billion in 2022 from Dh447.3 billion in 2021. A remarkable surge in retail spending levels, an upswing in international tourism, increased construction activity, a rapidly growing population, and an upturn in personal disposable income are expected to drive robust growth in long-term retail spending and investment, according to experts.

Owen said July saw rising pressure on firms' selling prices.

“Although overall charges levied for goods and services were broadly unchanged since June, it ended a 12-month sequence of discounting,” he said.

— issacjohn@khaleejtimes.com