Business activity in Dubai's non-oil economy improves in June

Construction, tourism and retail sector activity continued to rise at the end of the second quarter

The Dubai Frame. Business activity in Dubai's non-oil private sector economy improved at the end of the second quarter. Chris Whiteoak / The National

Business activity in Dubai’s non-oil private sector economy expanded in June, supported by a seventh monthly rise in output and an upturn in construction and tourism activity.

The emirate's seasonally adjusted IHS Markit Purchasing Managers' Index slipped from 51.6 in May to 51 in June. A reading above the neutral 50-mark indicates economic expansion while one below points to a contraction.

The latest data pointed to a moderate improvement in Dubai’s non-oil business activity as both output and new orders grew at a softer pace in June, pulled down by a weaker rise in sales and global supply shortages that hampered business activity.

"Business activity in the Dubai non-oil sector was hindered by weaker sales growth and raw material shortages in June,” said IHS Markit economist David Owen.

Panellists underscored an improvement in economic conditions as the effects of Covid-19 eased. Business activity continued to increase across the construction, tourism and wholesale and retail sectors, albeit at a softer pace from the preceding month. The wholesale and retail sector also recorded a rise in new orders.

There was a renewed upturn in activity levels in the travel and tourism sector after a slight decline in May, according to the survey. The sector recorded a drop in sales in June linked to the cancellation of flights from some destinations to curb the spread of the virus.

Dubai’s non-oil private sector economy is expanding as the emirate's Covid-19 inoculation programme picks up pace.

Widespread testing and high vaccination rates have helped the UAE to boost business confidence as its economy continues to bounce back from the coronavirus-induced slowdown.

Stimulus packages worth Dh7.1 billion ($1.93bn), which were unveiled by Dubai to support its economy and soften the pandemic's blow on businesses and people, have also fuelled business confidence.

The emirate’s economy is forecast to expand by 4 per cent in 2021, according to government projections released in December.

Businesses surveyed by IHS Markit expressed growing optimism in June regarding future output growth prospects as Expo 2020 Dubai, a six-month-long global fair, approaches. The degree of optimism for the next 12 months was the second strongest since September 2020, according to the survey.

There were renewed efforts to raise employment in the emirate at the end of the second quarter. The rate of job creation hit its quickest pace since November 2019.

However, input cost inflation increased in June, pushing output charges higher for the second time in three years. Elevated input prices forced some companies to lower their purchases and draw from current stocks to meet new orders.

“Lengthening delivery times, supply shortages and rising freight costs were often cited by panellists, leading to a second rise in output prices in three months following a near three-year run of decline," said Mr Owen.