Dubai's non-oil economy strengthened on robust output expansion and new business

Output levels rise considerably and business activity remains sharp, purchasing manager's index shows

Travel and tourism was Dubai's strongest performing sector in terms of demand growth in July, the latest purchasing manager's index shows. Bloomberg

Dubai's non-oil private sector continued to record strong gains in July but softened marginally from the previous month as new order growth remained sharp and supply side improvements kept cost pressures mild.

The emirate's seasonally adjusted S&P Global purchasing managers' index reading eased to 55.7 in July, from 56.9 in June, well above the neutral 50 threshold.

A reading over 50 indicates an expansion in business conditions, while one below represents a contraction.

The survey, which covers the construction, wholesale and retail, and travel and tourism sectors, showed that the upturn was largely driven by a sustained expansion in business activity, with the rate of growth remaining marked and similar to that seen in June.

About 32 per cent of businesses surveyed said output increased on the back of higher sales volumes, a boost in marketing and work on current projects. Two per cent of respondents said output contracted over the month.

“Dubai's non-oil private sector continued to record strong gains in business activity and demand as we head into the second half of the year,” said David Owen, senior economist at S&P Global Market Intelligence.

“Growth in new order intakes, successful marketing and project wins drove a considerable upturn in output, with nearly a third of businesses seeing a monthly expansion.”

Travel and tourism remained the strongest performing sector in terms of demand growth, according to the latest survey.

Improved supply chains contributed to a softening of inflationary pressures in July, with businesses reporting only a fractional increase in their input costs, which was the smallest recorded in three months.

As a result, businesses continued to offer discounts to customers and said they were positive about future activity.

Dubai’s economy grew an annual 2.8 per cent in the first quarter of the year to Dh111.3 billion ($30.3 billion), extending the “robust momentum of growth” achieved in 2022, when it expanded by 4.4 per cent.

The emirate's economy is forecast to increase by 3.5 per cent in 2023, according to Emirates NBD.

The number of international visitors to Dubai exceeded pre-pandemic levels in the first half of this year, as the emirate's hospitality and tourism sector posted a record performance.

International visits to Dubai rose 20 per cent during the first half of the year as compared to the same period in 2022, with the emirate welcoming 8.55 million international visitors between the start of January and the end of June. This marks Dubai's best first-half performance yet, topping the previous high of 8.36 million tourists in the first half of 2019.

Dubai's property market has also made a strong recovery from the coronavirus-induced slowdown on the back of government initiatives such as residency permits for retirees and remote workers, as well as the expansion of the 10-year golden visa programme and the economic gains generated by Expo 2020 Dubai and higher oil prices.

Dubai is the world's top market for $10 million homes as sales hit $3.1 billion in the first half of the year, edging past Hong Kong and New York, according to global property consultancy Knight Frank.

In the first six months of this year Dubai accounted for 79 per cent of all homes sold for $10 million or more, according to the consultancy.