As Dubai’s non-oil economy continues to recover, global supply delays and increasing input shortages in March have led to the sharpest rise in prices in 28 months, according to a survey published on Sunday.
In the seasonally adjusted IHS Markit Dubai Purchasing Managers’ Index (PMI), which measures changes in output, new orders, employment, suppliers’ delivery times and stocks of purchased goods, the emirate was rated 51.0 in March, up fractionally from 50.9 in February.
"Global supply difficulties washed up on Dubai's shores in March, as the reduction in input availability led to the sharpest rise in prices for 28 months. This will constrain profit margins as competitive pressures and efforts to aid the recovery in demand led firms to lower output charges," David Owen, Economist at IHS Markit said.
Despite the input price inflation in March, output continued to expand, while new work picked up after a slight decrease in February. Firms also remained confident of a rise in business activity for the rest of 2021 as the economy continued to recover from the COVID-19 pandemic, the report said.
At the sector level, construction and travel & tourism saw improvements to their headline readings in March. According to the IHS Markit survey, construction firms saw the second-sharpest increase in output since the middle of 2019, thanks to easing COVID-19 restrictions that allowed project works to restart.
“Sector data meanwhile pointed to a surge in construction output, particularly as some projects were able to resume following COVID-19 restrictions,” Owen said.
“Wholesale & Retail growth also picked up but shrinking Travel & Tourism activity continued to weigh on Dubai's recovery as international travel restrictions further constrained new orders,” he added.
While businesses raised their stocks of purchases again in March, after a five-month period of decline up to January, many firms faced shortages of inputs linked to wider global supply problems, which contributed to a further lengthening of suppliers’ delivery times.
Efforts to contain costs meant that staff levels were reduced for the first time in 2021-to-date. "That said, the fall in employment was only slight," the report noted.
(Reporting by Seban Scaria; editing by Daniel Luiz)
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