The Dubai economy signals recovery in July, indicates IHS Markit’s Dubai Purchasing Managers’ Index (PMI). The latest PMI survey data indicated the first expansion in the Dubai non-oil economy for five months in July. Output and new business both rose at quicker rates, but employment fell further as companies looked to manage costs.
According to the survey panel, consumer demand continued to pick up as lockdown restrictions were loosened further. In particular, firms found that the reopening of tourist destinations and the resumption of international flights helped to generate additional sales.
The uplift in business activity was broad-based across the monitored sectors, led by construction and wholesale & retail. Travel & tourism lagged behind in terms of output growth, but recorded the first rise in activity since February amid government efforts to restart tourism.
Commenting on whether Dubai economy signals recovery in July, David Owen, economist at IHS Markit, said, “July PMI data for the Dubai non-oil private sector does signal the start of a post-COVID-19 recovery. The headline reading of 51.7 pointed to the first month of improvement since February, driven by stronger expansions of activity and new work. 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. However, the rate of reduction did slow from June.”
Although growth in new work and business activity accelerated in July, the outlook among Dubai businesses weakened for the first time since April. Businesses were generally hopeful of a recovery in output over the coming year. However, some companies predicted that it would take longer than previously thought to recover from the COVID-19 pandemic.
“Despite the non-oil economy gaining traction, business’ optimism of a rise in activity in the next 12 months weakened in July. 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, the disparity on this appeared to widen,” Owen concluded.