Non-oil businesses in Dubai witnessed a robust expansion in May owing to significant improvement in the travel and tourism sector and a recovery in sales, according to a recent business survey. However, overall business confidence plunged to a one-year low due to cost pressures triggered by uncertainty in global markets.

The S&P Global Dubai Purchasing Managers' Index (PMI) rose to 55.7 in May, up from 54.7 in April, indicating a robust improvement in the health of the non-oil private sector. The latest reading is the highest since June 2019.

David Owen, Economist, S&P Global Market Intelligence, said: "May's PMI data for the Dubai non-oil economy had two prominent findings: firstly, that global energy market volatility drove cost inflation to an over four-year high; and secondly, that a fast-recovering tourism sector is now masking weak performances in the rest of the economy."

According to the S&P PMI survey, panellists often noted an improvement in client demand as markets recovered from the pandemic. However, there was a  considerable disparity in sales performance by sector.

"On the new orders side, travel & tourism was the only sector to see an acceleration in growth in May, rising to the quickest pace for nearly three years. By comparison, wholesale & retail growth eased to a three-month low, while construction recorded the first decrease in new work since last September," Owen said.

Meanwhile, the survey data indicated a further increase in non-oil business activity during May, mainly due to rising new order volumes and ongoing project works.

Businesses in Dubai recruited more employees in May compared to April. "While only marginal, the pace of job creation was the fastest in 2022 so far," S&P said in its report.

Looking ahead, businesses were less confident of a rise in activity over the coming year in May, as inflation fears weighed on expectations of sales growth. In fact, the degree of optimism slipped to the weakest since May 2021, the survey noted. 

(Reporting by Seban Scaria; editing by Daniel Luiz)