Dubai non-oil economic activity rose to 16-month high in December

New order growth accelerated to the second quickest since mid-2019, while cost pressures eased

Companies in Dubai continued to report rapid improvements in sales and activity last month. Pawan Singh / The National

Dubai's non-oil private sector grew robustly in December, with activity reaching its highest level in 16 months as new orders rose and cost pressures eased.

The seasonally adjusted S&P Global Dubai purchasing managers' index reading hit 57.7 last month, up from 56.8 in November and well above the neutral 50-point mark separating an expansion from a contraction.

The reading was the highest since August 2022 and the second highest in four-and-a-half years.

Companies continued to report rapid improvements in sales and activity, while softening cost pressures allowed them to offer greater discounts to customers, the survey said.

“The Dubai non-oil economy ended 2023 on a high, according to PMI results, as the headline index rose to a 16-month peak and indicated a substantial improvement in business conditions in December,” said David Owen, senior economist at S&P Global Market Intelligence.

New order growth accelerated to the second quickest since mid-2019, “confirming the strength of market demand across the emirate as we enter the new year”, he said.

About 30 per cent of survey members noted an improvement in new orders.

The strongest upturn in sales was in the wholesale and retail sector, while the travel and tourism sector also registered robust growth.

The emirate has been recording a surge in tourism, with the Dubai International Airport welcoming 22.9 million passengers in the third quarter of 2023, the highest quarterly traffic since 2019, Dubai Airports said in November.

That took the total traffic for the first nine months of the year to 64.5 million passengers, up 39.3 per cent compared with the same period in 2022.

Overall, Dubai Airports expects to exceed pre-coronavirus levels for 2023 with 86.8 million travellers, up from 86.4 million in 2019.

Dubai's overall economic growth momentum is expected to continue after its gross domestic product expanded by 3.2 per cent annually in the first half of last year to Dh223.8 billion ($60.9 billion), according to official data released in October.

It was driven by growth in sectors such as transport, trade, financial services, accommodation and food services, property, information and communication, and manufacturing.

“The economic expansion is consistent with the goals of the Dubai Economic Agenda D33 to double GDP growth over the next decade and consolidate the emirate’s position as one of the world’s top three urban economies,” Sheikh Hamdan bin Mohammed, Crown Prince of Dubai, said at the time.

The D33 agenda includes 100 transformative projects with an aggregate economic target of Dh32 trillion, including the doubling of foreign trade to Dh25 trillion during the next decade.

The agenda also aims to boost the contribution of foreign direct investment to Dubai's economy to $177 billion over the next 10 years.

In November, the emirate also approved its budget for 2024, with Dh79.1 billion earmarked for spending.

The move aims to support Dubai's ambitions to stimulate the macroeconomy and achieve the objectives of its Strategic Plan 2030 development project, the media office said at the time.

Dubai's non-oil companies attributed an increase in new work last month to improving market conditions and greater client demand, which was, in turn, partly linked to a drop in output charges, the survey found.

Selling prices decreased at the fastest pace since June as costs fell on improving supply lines and lower material prices.

Reports of increased wages and higher input demand meant that overall expenses rose, but at a subdued pace, according to the survey.

Companies raised their workforce numbers further in December, as part of efforts to expand operations and fulfil output requirements.

Job creation quickened to a four-month high and was broadly in line with the series average, the survey said.

Business expectations also recovered at the end of the year after slipping to a seven-month low, with the level of optimism among “the strongest recorded” since before the start of the pandemic.