Dubai non-oil sector growth softens in September - PMI

Direct growth impact from Expo 2020 event set to be modest

An Aerial View of Dubai Marina at Sunset in Dubai, United Arab Emirates. Image used for illustrative purpose.

An Aerial View of Dubai Marina at Sunset in Dubai, United Arab Emirates. Image used for illustrative purpose.

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Growth momentum in Dubai’s non-oil sector softened slightly in September as orders declined for the first time since February. Growth in jobs also fell to a four-month low, a new survey showed.

The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index (PMI) registered 51.5 in September, slipping from 53.3 in August. While the index still held above the 50-mark that indicated expansion, surveyed companies said that weaker customer demand and discounts at competing firms were behind the drop in sales.

Nevertheless, business confidence improved with the Expo 2020 opening on 1 October, as firms hoped that the event will drive higher sales. The overall rise in optimism was led by travel & tourism and wholesale & retail businesses.

Video: Growth in Dubai’s non oil sector softens in September

David Owen, Economist at IHS Markit, said: “Firms were largely unconcerned about the setback for order books in September, with the expansion in output remaining sharp and close to August’s two-year high. As a result, the headline PMI was above the crucial 50.0 mark and ended the third quarter at its highest three- month average since the end of 2019.”

He said that while IHS Markit predicts that the direct growth impact from the Expo 2020 event will be modest, “the latest PMI data highlighted a considerable impact on near-term business confidence."

Among sectors, the construction industry led the decline, as new work fell for the first time since June. Travel & tourism firms, however, saw a sustained upturn in sales, which some panellists linked to increased demand in the run up to Expo 2020.

The survey also showed that supply chains remained under pressure amid global transport issues and business capacity constraints.

The fall in new orders weighed on hiring too. Employment rose only marginally and to the least extent in four months.

Input costs rose during the survey period. However, the rate of cost inflation slowed and was only marginal. “This contributed to a reduction in average prices charged for the third successive month, as firms often mentioned lowering their prices in line with their competitors.”

(Writing by Brinda Darasha; editing by Seban Scaria)

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