Dubai non-oil sector sharply improves, job creation hits 21-month high

Dubai's non-oil sector witnessed sharp improvement in October, helped by new order growth, according to IHS Markit Dubai Purchasing Managers' index released on Monday.

The seasonally adjusted PMI rose from 52.6 in September to 54.6 in October, signalling a sharp improvement in operating conditions at non-oil private sector firms in Dubai. This increased activity resulted in more job creation in the emirate, which reached 21-month high last month.

"Key to the uptick was a strengthening of new order growth, which improved for the first time in five months amid higher demand at a number of surveyed companies. Sectoral data showed an acceleration among travel & tourism firms, while construction and wholesale & retail firms reported a weaker uplift in sales," it said in a press statement released on Monday.

"Business conditions in Dubai strengthened at an accelerating pace in October, as the headline PMI rose for the second month running from August's recent low. Driving the increase was a notably sharper rise in new work, concentrated on the travel and tourism sector," said David Owen, economist at IHS Markit.

"However, a good proportion of panellists resorted to further price drops during October, in order to achieve higher sales, as has been the case for the past year and-a-half. More importantly, the rate at which selling prices declined was the fastest since February 2016, underpinning the challenge of deflation that the UAE has experienced this year," he said, adding that cost pressures are weak though, while output levels are still rising at a sharp pace, suggesting that businesses are coping with the squeeze on their margins for the time being.

With the amount of new work increasing, businesses expanded their output levels sharply in October. That said, the rate of expansion was the second-weakest seen over the past year. The upturn translated into greater hiring activity, marking the second successive rise in workforce numbers. Moreover, the rate of job creation strengthened to a 21-month high, despite being marginal overall.

Meanwhile, Dubai non-oil firms built up their inventories at the start of the fourth quarter, as several panellists noted an anticipation of larger orders in the future. The overall expansion was solid and the fastest since April.

However, increased purchasing activity placed greater pressure on suppliers, with lead times improving at the softest rate since the series began in January 2010. Alongside higher demand, some respondents noted that a delay in payments to suppliers led to slower deliveries.

Finally, Dubai firms' projections for future output improved during October, after reaching a nine-month low in September. Most firms remained optimistic of a boost to activity, citing expectations that domestic market conditions will stabilise and drive demand higher. Anticipation for greater activity in the run-up to the Expo 2020 was also mentioned, said the press statement.

-waheedabbas@khaleejtimes.com