Dubai's non-oil economic activity grows at fastest rate since 2019

Business activity in the emirate maintained robust growth momentum in February

Business activity in Dubai's non-oil private sector economy grew at the fastest rate in almost four years in February, as continued economic momentum resulted in new orders and an improvement in employment rates.

The seasonally adjusted S&P Global Dubai purchasing managers' index reading rose from 56.6 in January to 58.5 in February, staying well above the neutral 50-point mark separating economic expansion from a contraction.

The index matched the May 2019 level, the joint-highest seen in more than nine years, indicating a sharp improvement in operating conditions in the emirate.

Hiring activity last month also remained robust, with the pace of job creation improving at the highest level recorded since August 2015.

“The Dubai PMI … suggests that the Dubai non-oil economy is growing rapidly so far this year,” David Owen, senior economist at S&P Global Market Intelligence, said.

“The reading signals that the Dubai non-oil sector is one of the fastest growing worldwide according to global PMI data.”

Businesses said the upturn was largely driven by output increase, signalling the fastest upturn in one-and-a-half years. Stronger market conditions and greater project work were cited among the main reasons for higher output levels in February.

After falling to a five-month low in January, the pace of business growth also improved midway into the first quarter, with sharp expansions recorded across sectors.

Strong customer demand continued to support order intakes, which was also driven by price cuts and sales promotions. Average output charges decreased at the fastest pace in eight months, with the biggest reduction recorded in the wholesale and retail sectors of the emirate's economy.

“Output and new order volumes are proving especially robust, with companies reporting new clients, higher demand and a still improving economy post-pandemic,” Mr Owen said.

Dubai, one of the main commercial, tourism and financial hubs in the Middle East, has maintained a robust growth momentum since the Covid-19 pandemic slowdown.

The emirate's economy expanded by an annual 3.3 per cent in the first nine months of last year, driven by growth in the tourism and transport sectors, the emirate's media office said.

Dubai is pursuing its D33 economic growth agenda launched in January last year, which aims to increase the size of the economy to Dh32 trillion ($8.71 trillion) by 2033 and establish Dubai as one of the top three cities in the world.

The emirate recorded its best annual tourism performance in 2023, with international arrivals increasing by 19.4 per cent annually to 17.15 million, amid the continued expansion of its economy.

Last year’s figure exceeded the previous record of 16.73 million visitors registered in 2019, according to the latest data from Dubai’s Department of Economy and Tourism.

In February, Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai announced the emirate's non-oil foreign trade had hit Dh2 trillion ($540 billion) mark, a year ahead of the target, driven by continuing economic growth.

S&P said the robust non-oil activity in Dubai led to an increase in the employment level in February, with the pace of job creation quickening to the sharpest recorded since August 2015.

There was also a “marked and faster” rise in inventories of inputs and semi-finished items, the greatest seen for three months.

However, businesses surveyed signalled an “adverse impact” on supplier performance as a result of shipping disruption due to the Red Sea crisis.

Businesses also remained optimistic about the 12-month outlook of Dubai's non-oil economy, with output expected to grow.

“Inflationary pressures remained soft which encouraged greater sales promotions, while employment and inventory growth strengthened. All this suggests that the non-oil sector's expansion has further to run during 2024,” Mr Owen said.