Dubai's non-oil economy maintains 'robust' momentum in September

The rate of expansion was the second fastest in more than three years

Dubai's skyline. New business in the emirate's travel and tourism sector rose sharply in September. Reuters

Business activity in Dubai's non-oil private sector economy maintained a "robust" rate of expansion in September, although at a slower pace, as new orders rose sharply despite an increase in input costs.

The emirate's headline seasonally adjusted S&P Global purchasing managers' index reading stood at 56.2, a three-month low, in September.

A softer rise in staffing and inventories pulled it back from the 38-month peak of 57.9 achieved in August.

A reading above the neutral 50 level indicates economic expansion while one below points to a contraction.

“PMI data for September continued to signal a robust improvement in operating conditions at non-oil businesses in Dubai, thus continuing projections for the strongest quarter of growth for roughly three years,” said David Owen, an economist at S&P Global Market Intelligence.

“That said, the headline index was down from August's recent peak for the first time in five months, as rates of expansion in output, new orders, employment and stocks of purchases softened.”

While non-oil activity in the emirate, the business and tourism centre of the Middle East, increased at a softer pace than August, the rate of expansion was still the second fastest in more than three years, remaining above the long-run series average of 54.5.

"The September reading makes for the strongest quarter of growth in several years, supporting our view that Dubai and the UAE will remain among the global outperformers in 2022," Daniel Richards, Mena economist at Emirates NBD said in a research note on Tuesday.

Businesses surveyed underlined their inability to raise activity due to “another sharp increase in new business inflows”, according to the S&P survey.

After a moderation of energy costs that drove input prices in August to a record low, the latest data pointed to a rise in costs in September.

However, the rate of inflation was the slowest recorded in about 12 months, as weaker global demand continues to keep commodity prices in check while easing the cost burden on businesses.

PMI data for September continued to signal a robust improvement in operating conditions at non-oil businesses in Dubai, thus continuing projections for the strongest quarter of growth for roughly three years

David Owen,
economist, S&P Global Market Intelligence

Oil prices, which rose sharply after the 23-member Opec+ group of oil producers announced an output cut of 2 million barrels per day on October 5, have softened again on China demand concerns, the slowing global economy and rising interest rates amid rising inflation.

The mild increase in expenses last month also came amid a renewed shortening of input lead times, the second quickest since the start of 2021.

Output charges were subsequently dropped for the second month running as companies indicated additional efforts to keep prices affordable for customers.

However, the reduction in selling prices was softer compared to that of August.

Sector data showed that sales growth was mainly driven by wholesale and retail sector businesses in September, which recorded a 38-month high.

New business in the travel and tourism sector, a key contributor to economic activity in the emirate, also rose sharply, although the pace of growth was the weakest since January, when Expo 2020 Dubai drove business.

Dubai hosted 7.12 million international visitors in the first half of 2022, about three times the 2.52 million tourists recorded in the same period last year, as it pursued its goal to become the world's most visited destination.

The recent data brings the emirate closer to its pre-coronavirus pandemic levels of 8.36 million arrivals in the first six months of 2019, despite the slowdown in the global economy.

"The sector is expected to enjoy a fillip from the Fifa World Cup in Qatar through the end of the year," Mr Richards said.

Dubai's economy, which made a strong rebound last year from the coronavirus-induced slowdown, has carried the growth momentum into this year, supported by the travel and tourism sector and its rapidly improving property market.

The emirate's economy grew by 6.2 per cent in 2021, according to preliminary data from the Dubai Statistics Centre. In the first three months of this year, Dubai's gross domestic product expanded 5.9 per cent, according to government data.

Businesses remained bullish on the emirate's non-oil economy. Panellists expect market trends to "stay strong despite global challenges, driving further increases in new work and output", according to the survey.