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Faster upturn in sales boosts Dubai business confidence

The rate of growth of the private sector economy accelerated for the first time in three months

Published: Tue 10 Oct 2023, 4:24 PM

Updated: Tue 10 Oct 2023, 4:25 PM

By
Issac John

Tourists at Dubai Mall. Additional sector data indicated faster upturns in travel and tourism, wholesale and retail and construction. — KT file

Driven by a much faster upturn in new business, which was the sharpest recorded in over four years, confidence across Dubai’s non-oil sector received major fillip by end of the third quarter, according to the latest PMI survey data released on Tuesday.

The rate of growth of the private sector economy accelerated for the first time in three months as a strong rise in sales helped to boost business confidence to the highest level since March 2020, S&P Global Purchasing Managers Index data shows. “At the same time however, employment growth waned to the softest since February, while firms added to their inventories at a slower pace. These slowdowns occurred amid a sharper rise in overall input costs, which also suppressed sales discounting efforts,” the PMI report noted.

At 56.1 in September, up from 55.0 in August, the headline PMI “signalled a robust improvement in non-oil operating conditions across Dubai, and the strongest performance for three months. Driving the headline index higher was a much sharper increase in new orders during September,” said the survey, which covers the non-oil private sector economy, with additional sector data published for travel and tourism, wholesale and retail and construction.

“Dubai non-oil companies reported a rapid acceleration in sales growth during September, which climbed to the highest in over four years and was spurred on by new clients and strengthening economic conditions,” said David Owen, senior economist at S&P Global Market Intelligence.

In the first quarter, Dubai’s real GDP grew 2.8 per cent year-on-year to reach Dh111.3 billion, surpassing average global rates.

The PMI survey data signalled that non-oil companies raised their employment numbers over the month, but the rate of job creation was mild and the weakest since February. The pace of inventory accumulation also slowed from the prior month and was only modest.

Owen said while the impact on business activity growth was muted during the month, business confidence regarding future activity ticked up further to the highest recorded since the start of the Covid-19 pandemic, signalling that firms’ near-term growth expectations have improved.

“Meanwhile, rising input prices drove a solid and faster mark-up of overall business expenses, which notably tempered the rate of price discounting - indeed, output charges fell only fractionally. The pick-up in cost pressures also appeared to inhibit hiring and inventory growth, which could lead to some capacity constraints if demand continues to rise rapidly,” he said.

Panellists who took part in the survey said the pace of expansion quickened to the highest since June 2019 on the back of improving demand conditions, greater sales efforts and the ability to provide more services to clients. Additional sector data indicated faster upturns in travel and tourism, wholesale and retail and construction.

A particularly rapid acceleration of growth was shown by the wholesale and retail category from August. “The sharper rise in sales underscored a further substantial uplift in business activity in September, albeit one that was still slower than those recorded around the middle of the year,” said the report.

The report noted that companies were also hopeful that strengthening demand conditions will support demand and activity in the future, leading to the highest degree of confidence since March 2020. Greater optimism was driven by the construction and wholesale and retail sectors.