Business activity in Dubai's non-oil private sector economy maintained a “robust” rate of expansion in August, although at a slower pace, supported by an increase in new orders, with the pace of job creation at its highest in about eight years.
The emirate’s seasonally adjusted S&P Global purchasing managers’ index reading eased to 55 in August, from 55.7 in July, dropping for the second month in a row, but remaining above the neutral 50 mark separating an expansion from a contraction.
The survey, which covers the construction, wholesale and retail, and travel and tourism sectors, showed that the degree of confidence picked up from July and was the second strongest in nearly two years.
Meanwhile, the rate of selling price discounting eased to the slowest since last November, as some businesses opted to pass through a stronger rise in input costs to customers, the PMI data showed.
“The Dubai non-oil private sector continued to exhibit a strong, but slowing growth trend halfway through the third quarter, with the PMI reading of 55 signalling a sharp improvement in operating conditions despite being the lowest since February,” said David Owen, senior economist at S&P Global Market Intelligence.
“While the expansion in business activity appears to have reached its peak, it is still running well above trend, boosted by strong new order inflows and robust economic conditions.”
The latest upturn widely encouraged companies to increase their headcounts, leading to the “joint-fastest rise in employment” since November 2015, S&P said.
Efforts to recruit more staff led to a solid rise in employment numbers across the non-oil private sector in August, the survey showed.
Companies also sought to build their inventories of inputs rapidly, leading to the sharpest accumulation of stock levels for five months.
“The latest data on business sentiment and hiring adds to these positive findings, suggesting that companies feel there is still considerable scope for expansion in a growing market,” Mr Owen said.
“Employment levels increased at the joint fastest rate since late 2015 while confidence in the 12-month outlook continued to run above the trend seen over the past decade.”
Dubai strengthened its status as a major global economic centre in the first half of 2023, continuing to perform strongly across sectors from tourism to property, Sheikh Hamdan bin Mohammed, Crown Prince of Dubai, said in July.
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, according to government data released last month.
The emirate's economy expanded by 4.4 per cent last year and is forecast to grow by 3.5 per cent in 2023, according to Emirates NBD.
The emirate's trade sector grew by 1.2 per cent in the first three months of the year from the same period in 2022, injecting Dh25.5 billion into the economy.
It accounted for 22.9 per cent of economic output, according to data from the Dubai Digital Authority.
While construction activity in Dubai continued to rise sharply in August, additional sector data revealed a slowdown at wholesale and retail companies, the S&P PMI survey found.
Central to the upturn was another sharp increase in new work during August, amid reports of higher client demand, increased tourism and continuing price promotions, the survey said.
However, the rate of sales growth eased slightly, and was at its softest since March, the survey found.
Companies expanding their inventories often requested quicker deliveries from vendors, supporting a sharp reduction in average lead times during August.
At the same time, companies reported increases in supplier charges for raw materials, resulting in a faster increase in overall cost burdens, according to the survey.
“The impact of rising input costs on company margins meant that firms were less inclined to offer discounts on their products and services. As such, the latest data indicated only a slight drop in average prices charged that was the weakest for nine months,” S&P said.
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Looking ahead, improving economic conditions, increased tourism and strong new work intakes are likely to support activity growth in the coming year, survey panellists said.
Dubai has been recording a boost in tourism, with the number of international visitors to the city exceeding pre-coronavirus levels in the first half of this year.
International visits to Dubai rose 20 per cent during the January to June period compared with the same period in 2022, with the emirate welcoming 8.55 million international visitors, according to official data.
This marks Dubai's best first-half performance yet, topping the previous high of 8.36 million tourists in the first half of 2019.
