Dubai's non-oil businesses expand for the first time since COVID-19

Improved business conditions largely driven by solid increase in new work received by companies in Dubai in July

  
Image used for illustrative purpose. Stock Market Exchange on a skyscraper in dubai background.

Image used for illustrative purpose. Stock Market Exchange on a skyscraper in dubai background.

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Dubai’s non-oil economy witnessed an expansion in July for the first time in five months, signaling the start of post COVID-19 recovery, according to a recent report.

The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index (PMI) rose to 51.7 in July, compared to 50.0 in June.

"July PMI data for the Dubai non-oil private sector signaled the start of a post-COVID-19 recovery,” said David Owen, an economist at IHS Markit. "The headline reading of 51.7 pointed to the first month of improvement since February, driven by stronger expansions of activity and new work."

According to the IHS Markit report, improved business conditions were largely driven by a solid increase in new work received by companies in Dubai in July.

Consumer demand also continued to pick up as lockdown restrictions were loosened further. The reopening of tourist destinations and the resumption of international flights helped firms generate additional sales. 

"Companies responded by raising purchases solidly and at the fastest rate in seven months. However, this came at a cost to cash flow. With margins tight and sales still at relatively weak levels, firms continued to shed jobs in order to cut back on staffing costs. The rate of reduction did slow from June though,” Owen said.

The report also showed that Dubai businesses reported a robust expansion in output at the start of the third quarter, with the rate of growth quicker than that seen in June and the best recorded this year.

"Despite the non-oil economy gaining traction, businesses optimism of a rise in activity in the next 12 months weakened in July,” Owen said.

“According to firms, uncertainty around the length of a recovery from the COVID-19 crisis is growing. Many businesses still expect to recover output by summer 2021, however disparity on this appeared to widen," he added.

(Writing by Gerard Aoun; editing by Seban Scaria)

(gerard.aoun@refinitiv.com)

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