Business conditions improve for Dubai’s non-oil sector

Business conditions in Dubai improved for the third straight month in September even as a renewed spike in coronavirus cases poses a threat to the city’s recovery.

Non-oil private sector activity in the Middle East’s business hub fared better amid a rise in activity and new business, according to IHS Markit. Its Purchasing Managers’ Index rose to 51.5 last month from 50.9 in August, remaining above the 50 mark that separates contraction from growth.

• Employment declined at the slowest in seven months, as business expectations improved slightly
• The pace of new business was faster than in August and demand growth was at a 10-month high
• A sharp increase in new orders seen in the wholesale and retail sector; construction work experienced “a modest rise”
• The travel and tourism sector continued to decline, but at the slowest pace since February
• Expectations of further growth were largely linked to a rebound in sales as lockdown measures are lifted

“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,” said David Owen, economist at IHS Markit. “Meanwhile, employment data signaled a cautious outlook as firms often shed workers to manage cost pressures and enable discounting.”

In the United Arab Emirates, of which Dubai is a part, the recent surge in cases is raising the prospect that new restrictions may be needed to stop the contagion. The country’s central bank already anticipates that the OPEC member’s economy will shrink 5.2 per cent this year, suffering a deeper contraction than first estimated.

“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,” Owen said. “Firms will thus be wary of expanding too much or too quickly.”