Dubai witnessed a significant uptick in non-oil private sector activity in February, marking its strongest performance since May 2019. Recent data from S&P Global‘s Purchasing Managers’ Index (PMI) reveal that this growth was driven by increased new order volumes and favorable market conditions. Companies in Dubai experienced fast activity growth, prompting an expansion in employment numbers and inventory. Despite some challenges such as shipment delays, the overall outlook remains positive, with firms expressing optimism for future growth.
Expansion in staffing numbers
Dubai’s PMI recorded 58.5 in February, a robust growth from January’s 56.6. This indicates a substantial improvement in operating conditions across Dubai’s non-oil sector. Moreover, February’s reading matched Dubai’s PMI in May 2019.
“The reading signals that the Dubai non-oil sector is one of the fastest growing worldwide according to global PMI data,” stated David Owen, senior economist at S&P Global Market Intelligence.
The growth in Dubai’s non-oil sector prompted companies to expand their staffing numbers at the fastest rate in eight-and-a-half years. Moreover, firms accumulated inventories of inputs and semi-finished items rapidly, despite some reports of shipment delays. Notably, cost pressures remained modest despite picking up to a three-month high. Meanwhile, output charges declined at the strongest rate in eight months.
Growth of business activity
Companies operating in Dubai’s non-oil sector continued to widely report growth in business activity in February. In fact, 36 percent of respondents saw their output increase since the previous survey period, signaling the fastest upturn in one-and-a-half years. Firms cited an increase in demand, strong market conditions, and greater project work as the main reasons for higher output.
Moreover, the rate of new business growth accelerated halfway through the first quarter, with sharper expansions in all the key industries the survey monitors. In addition, strong customer demand continued to support order book intakes in Dubai’s non-oil sector, according to qualitative evidence.
Meanwhile, companies in the non-oil sector widely noted the impact of price cuts and sales promotions. Average output charges decreased at the fastest pace in eight months, with the most prominent reduction in the wholesale and retail sectors.
Supplier performance
Supplier performance in Dubai’s non-oil sector was relatively stable midway through the first quarter of 2024. Non-oil companies saw another mild shortening of average lead times. Although slightly quicker compared to January, the rate of improvement was the second lowest in over a year. Firms stated that the impact on supplier performance was a result of shipping disruption due to the Red Sea crisis.
Concurrently, the rate of input cost inflation in Dubai’s non-oil sector ticked up to a three-month high. However, it was still only modest overall and weaker than the long-run trend.
“Inflationary pressures remained soft which encouraged greater sales promotions, while employment and inventory growth strengthened. All this suggests that the non-oil sector’s expansion has further to run during 2024,” added Owen.
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Future outlook
When assessing the 12-month outlook, Dubai’s non-oil sector had a more positive view compared to January 2024. Around 19 percent of respondents expected output to grow and the rest remained neutral. Notably, business activity projections improved in all monitored sectors.
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