Business conditions in Dubai improve; job losses are reducing

Latest IHS Markit survey data indicated stronger increases in both output and new business across the private sector in September

  
RTA dubai has started experimenting the use of AI technologies - machine learning algorithms - in plotting bus routes in Dubai, based on the extent of usage throughout the day. Image courtesy Dubai Media Office Twitter handle.

RTA dubai has started experimenting the use of AI technologies - machine learning algorithms - in plotting bus routes in Dubai, based on the extent of usage throughout the day. Image courtesy Dubai Media Office Twitter handle.

The Dubai non-oil private sector saw another modest improvement in business conditions during September, amid efforts to recover from the COVID-19 outbreak and lockdown measures.

Activity and new business rose at faster rates than in August, with demand growth reaching a ten-month high. As a result, the decline in employment slowed to a moderate pace, while business expectations improved slightly, according to IHS Markit.

The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index (PMI) posted at 51.5 in September, showed a third successive monthly improvement in the performance of the non-oil private sector. The index rose from 50.9 in August, but remained below that seen in July and markedly down on the series average of 54.7.

David Owen, Economist at IHS Markit, said: "September PMI data finalised a third-quarter period of modest economic recovery in Dubai. The PMI has consistently remained above the 50.0 no-change mark since July, as business activity grew during the easing of COVID-19 restrictions."

The survey data indicated stronger increases in both output and new business across the private sector in September. Notably, the rate of sales growth reached the strongest for ten months, driven by reports of higher client demand and the starting of new projects as more economic activity resumed.

The wholesale and retail sector saw another sharp rise in new orders during the month, with growth near-matching that seen in August. The strong upturn led a modest rise in construction work. Travel & tourism business continued to decline, albeit at the slowest pace since February.

In line with recent survey periods, firms in the Dubai non-oil sector reported price cuts during September in an effort to boost sales. The rate of discounting slowed from August, but was still solid and partly accountable for the rise in sales, according the IHS Markit survey.

Meanwhile, output levels expanded solidly for the fourth month in a row, as firms noted efforts to build activity back to pre-virus levels. That said, evidence of further cuts to jobs highlighted the need for some firms to reduce staff expenses.

Employment, hopes of further growth

On a positive note though, the fall in employment was the weakest in seven months. Staff cuts continued to stave off any notable rise in cost pressures in September, with input prices up only marginally, IHS Markit said.

Nevertheless, amid a solid drop in selling prices, margins remained under considerable pressure. Business expectations regarding the year ahead ticked up at the end of the third quarter, albeit with companies overall giving a relatively subdued outlook for activity.

"On the downside, the PMI has failed to lift off or signal any strong rebounds in output so far, with firms often initiating price cuts in order to drive sales higher. Meanwhile, employment data signalled a cautious outlook as firms often shed workers to manage cost pressures and enable discounting," Owen said.

According to IHS Markit, hopes of further growth were largely linked to a recovery in sales as COVID-19 lockdown restrictions are eased.

"The recent rise in COVID-19 cases across the UAE and the threat of reimposed restrictions could lead to a further dip in activity later this year. Firms will thus be wary of expanding too much or too quickly," he added.

(Writing by Seban Scaria seban.scaria@refinitiv.com; editing by Daniel Luiz)

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