Dubai’s non-oil sector saw stronger uplift in business conditions in December 2021, driven by a rapid increase in new orders as firms continued to enjoy strong demand from tourism and the relaxing of Covid-19 measures.
The seasonally adjusted IHS Markit Dubai Purchasing Managers’ Index (PMI) rose to its highest level in two-and-a-half years in December. At 55.3, up from 54.5 in November, the PMI signalled a sharp improvement in operating conditions.
“Dubai's PMI continued to signal strong growth in the non-oil private sector at year-end, with the Expo 2020 and a general improvement in demand helping to lift the economy further out of its pandemic-induced downturn,” said David Owen, Economist at IHS Markit.
"Most notably, the New Orders Index was at its highest level for 29 months, and back in line with the series trend after running below it for the entirety of the pandemic. Output was also strong, expanding at the second-fastest pace since mid-2019. Inflationary pressures were much sharper, however, as higher energy and raw material costs drove the fastest rise in overall input prices for nine months. Firms continued to reduce their charges, albeit at a much softer rate than in November,” added Owen.
The survey found that the rate of growth in new orders was the quickest seen since July 2019, and back in line with the trend for the series which began 12 years ago. Companies also cited an improvement in local sales as consumer confidence grew.
Of the three sectors monitored by the survey, travel and tourism continued to lead the way in terms of sales growth, closely followed by wholesale and retail. New work at construction firms rose at the fastest rate since February, but was still well behind the other two categories.
There were some efforts to build staff capacity in December, with latest data indicating a renewed rise in employment. The expansion was modest but nonetheless one of the strongest recorded since the start of the pandemic.
However, a much quicker rise in input prices was also registered, putting pressure on firms’ margins and limiting their ability to purchase extra inputs.
According to panellists, higher prices for raw materials often discouraged buying activity. As well as higher raw material costs, firms also mentioned an uplift in energy prices in the latest survey period, whereas staff expenses were broadly flat. The rate of overall input price inflation accelerated sharply to the highest since March.
The outlook for future activity slipped again at the end of the year. Despite the current strong expansion, many companies were uncertain as to how the Omicron variant would impact new business and travel. Only 12 per cent of respondents were confident that output would expand over 2022.
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