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Dubai’s non-oil private sector growth softens in September

Waheed Abbas /Dubai
waheedabbas@khaleejtimes.com Filed on October 11, 2021

(Reuters file)

Despite a fall in new business, non-oil companies continued to increase output at a sharp pace in September

Dubai’s non-oil private sector expanded at a modest pace in September as output continued to expand at a strong rate, but new orders declined for the first time since February 2021.

The headline IHS Markit Dubai Purchasing Managers' Index (PMI), which measure changes in output, new orders, employment, suppliers’ delivery times and stocks of purchased goods, registered 51.5 in September, showing an improvement in operating conditions in the non-oil economy that extends the current run of growth to a 10th successive month. However, the PMI slipped from 53.3 in August, indicating a modest expansion overall.

A reading above 50 indicates an overall increase compared to the previous month and below 50 an overall decrease.

“With Expo 2020 opening on October 1, business confidence improved as firms hope that the event will drive a renewed increase in sales. The overall rise in optimism was led by travel and tourism and wholesale and retail businesses in September,” IHS Markit said.

A Dubai Chamber survey on Sunday also revealed that confidence among businesses reached its highest level in 10 years, thanks to improved business activity during the Expo 2020.

September data pointed to the first decrease in new business for seven months. Whilst only marginal, the decline was the joint-strongest since May 2020. Surveyed companies highlighted that weaker client demand and discounts at competing firms were behind the drop in sales.

David Owen, economist at IHS Markit, said the Expo 2020 should drive increased sales in the services sector over the next six months at least. Whilst IHS Markit predicts that the direct growth impact from the event will be modest, the latest PMI data highlighted a considerable impact on near-term business confidence.

“Firms were largely unconcerned about the setback for order books in September, with the expansion in output remaining sharp and close to August’s two-year high. As a result, the headline PMI was above the crucial 50.0 mark and ended the third quarter at its highest three-month average since the end of 2019,” he said.

Despite a fall in new business, non-oil companies continued to increase output at a sharp pace in September. The rate of growth slipped from August but was still the second-strongest in over a year.

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“Additionally, expectations for future output improved for the fourth month running, as firms were hopeful that the economy will continue to rebound from the pandemic and Expo 2020 would drive higher sales. Confidence in the travel and tourism category reached a five-month high in September and outpaced that seen in the rest of the non-oil sector,” IHS Markit said.

The survey found that Dubai firms continued to build their labour forces at the end of the third quarter but there were signs that the fall in new orders weighed on hiring, as employment rose only marginally.

Waheed Abbas





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