Dubai's non-oil economy hits eight-month high on stronger sales and new order boost

Business conditions improved at one of the fastest rates since mid-2019 amid momentum in the travel and tourism sector

The Dubai skyline. The emirate's S&P Global purchasing managers' index reading rose to 56.4 in April. Reem Mohammed / The National

Business activity in Dubai's non-oil private sector economy rose to an eight-month high in April, boosted by a sharp rise in sales and new orders as demand growth quickened.

The emirate's seasonally adjusted S&P Global purchasing managers' index reading rose to 56.4 in April, from 55.5 in March, remaining above the neutral 50 mark separating an expansion from a contraction.

“A surge in sales momentum in the travel and tourism and wholesale and retail sectors helped send the Dubai PMI to an eight-month high … signalling a robust improvement in the health of the non-oil economy,” said David Owen, a senior economist at S&P Global Market Intelligence.

“The upturn meant that business conditions grew at one of the fastest rates since mid-2019, as new business intakes increased to a much sharper degree than in March and activity levels rose more quickly.”

About 29 per cent of survey respondents reported an expansion since the previous month, compared to only 4 per cent that noted a decline.

New clients, lower prices and increased market activity all served to drive sales volumes higher, according to anecdotal evidence.

Dubai's economy expanded by 4.6 per cent on an annual basis in the first nine months of 2022, with wholesale and retail trade accounting for 24.1 per cent of its gross domestic product, according to data from the emirate's statistics centre.

Emirates NBD estimates Dubai's full-year growth for 2022 at 5 per cent and expects its GDP to expand by 3.5 per cent in 2023.

"Dubai’s non-oil private sector has seen solid growth in the first four months of this year, with the PMI averaging 55.1, compared with 54.2 in the same period last year," the bank said in research note on Tuesday.

The aviation and tourism sector, a key component of the emirate's non-oil economy, is growing strongly this year after rebounding from the coronavirus-induced slowdown.

The tourism sector in the first quarter likely received a boost from the Eid holidays in April, with activity and new work rising sharply, the latter at the fastest pace in eight months, Emirates NBD said.

"There was some price discounting in the travel and tourism sector in April, but not to the same extent as in the trade sector."

Dubai International Airport increased its annual passenger forecast for this year after reaching 95.6 per cent of its pre-pandemic levels of traffic in the first quarter of this year.

The airport handled 21.2 million passengers during the first three months of the year, up 55.8 per cent from the first quarter of 2022, Dubai Airports said on Tuesday.

It is the first quarter since the final three months of 2019 that average monthly traffic has reached seven million, the state-owned airport operator said.

Dubai Airports also raised its passenger forecast for the year to 83.6 million, up from an earlier estimate of 78 million.

Meanwhile, Dubai's property market also registered strong growth in the first quarter, with total transaction value up 80 per annually to Dh157 billion ($42.75 billion) in the first quarter of 2023, according to official data.

The number of transactions also rose 49 per cent to 38,715 during the period.

Sustained efforts by companies “to build inventories in the light of a promising demand outlook, as well as recruiting staff to support higher workloads” supported Dubai's non-oil sector in April, Mr Owen said.

The survey also found that there was a sustained improvement in supply chains.

Average lead times on inputs shortened for the fourth month running as vendors were often able to deliver more quickly when requested, it said.

Companies also sought to add workers in April in line with higher output requirements. The rate of job creation slowed from the more than five-year high for March but remained elevated.

Meanwhile, average prices paid for inputs were broadly unchanged from the previous survey period.

This led to several price promotions in April, the report said, with the rate of charge discounting “the quickest recorded in three and a half years”.

Business confidence towards future activity remained positive, with companies broadly hoping that improving market conditions would drive activity higher.