Dubai's business recovery continues, but travel and tourism sector curbs growth

The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index (PMI) posted 50.9 in February, up slightly from 50.6 in January

City skyline and cityscape at sunrise in Dubai.UAE.

City skyline and cityscape at sunrise in Dubai.UAE.

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Business conditions in Dubai continued to strengthen in February as output and employment numbers rose amid growing confidence among firms for a strong economic recovery in 2021.

However, the rate of expansion was stymied by a renewed fall in new business inflows that was centered on the travel & tourism sector, a new survey from HIS Markit said.

The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index (PMI) posted 50.9 in February, up slightly from 50.6 in January and signalling a third successive monthly improvement in operating conditions.

The IHS Markit survey covers the Dubai non-oil private sector economy, with additional sector data published for travel & tourism, wholesale & retail and construction.

The sales volumes in the non-oil sector fell for the first time since May 2020, mostly due to increased restrictions on consumer-facing services during the month amid efforts to suppress a recent rise in COVID-19 cases.

David Owen, Economist at IHS Markit, said: "New business inflows dropped for the first time since last May in February, suggesting that renewed restrictions on services have stymied the economic recovery from the pandemic. The overall fall in sales was only mild though and has so far not deterred firms from increasing output and employment."

The fall in new business was only slight, however, and softer than those recorded at the start of the pandemic.

Firms in Dubai were often optimistic that disruption to economic activity will be temporary, and that the successful rollout of COVID-19 vaccines could lead to a sharp rebound in output later in the year, the IHS Markit survey said.

“The successful roll-out of COVID-19 vaccines in Dubai gave firms' increased optimism for growth in business activity over the coming 12 months. However, the near-term outlook could be choppy as cases remain high and other parts of the world continue to restrict activity and travel," Owen said.

According to the survey, output growth was strongest in construction, followed by wholesale and retail. Travel and tourism bucked the trend with a further decline in activity. "Firms in the travel and tourism sector remain wary about their sales opportunities and the prospect of slamming the brakes on efforts to rebuild business capacity," he added.

Businesses also reported a further round of job creation, after employment rose for the first time in 11 months in January. The latest increase in staff numbers was only marginal though, the survey said.

(Reporting by Seban Scaria; editing by Daniel Luiz)


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