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Growth momentum softens, but Dubai firms optimistic

Issac John /Dubai
Filed on February 10, 2020

(File photo)

Growth momentum in Dubai's non-oil private sector softened for the third month in a row in January due to slow market conditions, but businesses generally looked forward to the coming 12 months with optimism, citing hopes of market stabilisation and new projects going forward, according to a survey.

While business expectations deteriorated further, output charges were again lowered amid efforts to reinvigorate new orders, the IHS Markit Dubai Purchasing Managers' Index shows.

A further weakening of sales growth in January, which slowed to a near four-year low, prompted a much softer expansion in output and falling job numbers.

The IHS Markit Dubai PMI fell from 52.3 in December to 50.6 in January, signalling the weakest improvement in the health of the non-oil private sector since February 2016.
The index is derived from individual diffusion indices that measure changes in output, new orders, employment, suppliers' delivery times and stocks of purchased goods
"Growth primarily eased due to a weaker expansion in business activity and subsequent drop in job numbers. At the sub-sector level, there was a modest improvement in the travel and tourism industry," said the report.

David Owen, economist at IHS Markit, said the PMI data showed that the headline figure was at its lowest level for nearly four years, and indicated only a slight improvement in business conditions. "Sub-sector data pointed to weakness in the construction, wholesale and retail categories, with these PMIs dipping below the 50.0 no-change mark for the first time since February 2016."

Notwithstanding the slow growth signs, most analysts expect Dubai World Expo 2020 would fuel the growth of Dubai economy by four per cent in the next one year as economic activity gains momentum.

Raed Safadi, chief economic advisor to Dubai Economy, expects Dubai's growth to rebound to as high as 3.8 per cent this year with Expo 2020 expected to add some $35 billion to the economy between 2013, the year of the announcement of the city-state's choice for the event, and 2030.

Employment in Dubai was notably affected, with companies reporting the joint-quickest fall in job numbers seen throughout the ten-year series history, added Owen.

"Business activity expectations slid to the joint-weakest for a year-and-a-half, suggesting that firms expect little pick-up in sales in the near future. Nevertheless, efforts to improve sales through lower output prices continued, with firms reducing their charges for the 21st month in a row."

Deteriorations in the construction, wholesale and retail sectors placed downward pressure on the headline index, said the report.

"Output in the Dubai non-oil economy expanded only modestly at the start of the year. The rate of growth slowed to the weakest in the current 47-month sequence."

Activity of the firms was subdued by soft new business volumes. New orders followed a similar trend to output, with latest data indicating the weakest increase in demand for nearly four years. - issacjohn@khaleejtimes.com


author

Issac John

Editorial Director of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.


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