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Private sector growth slows in Dubai

Private sector firms in Dubai faced a further slowdown in growth in February, as business conditions broadly stagnated, the latest data showed.
New business in the non-oil private sector shifted into contraction territory, while output growth was unchanged from January's recent low, while confidence for future activity dropped to the lowest since July 2017, according to data from Dubai Purchasing Managers' survey.
The IHS Markit Dubai PMI survey, which covers the non-oil private sector economy, with additional sector data published for travel & tourism, wholesale & retail and construction, signalled broadly unchanged business conditions midway through the first quarter of the year. The index dropped to a four-year low of 50.1 in February, from 50.6 in January due to weaker sales and lower inventories at Dubai firms, while output rose only modestly.
David Owen, economist at IHS Markit, said that Dubai firms saw a further slowdown in growth during February.
"The headline reading of 50.1 signalled that business conditions broadly stagnated, driven by the first monthly fall in new orders in four years," he said.
Owen noted that while economic weakness was mainly linked to unfavourable domestic conditions, some firms did note a negative impact from the coronavirus outbreak on tourism activity as flights were restricted. "With the outbreak appearing to intensify, this poses an additional challenge ahead for Dubai's economy. Firms reflected these growing concerns in their outlook for future activity, which deteriorated to the lowest in over two-and-half years."
Firms kept output growth at a subdued pace amid the drop in business confidence, while stocks of purchases fell to the greatest extent since October 2010, said Owen.
The survey report said construction fared the worst of the monitored categories, recording a moderate decline in business conditions, while the travel & tourism sector stalled and wholesale & retail registered only a slight improvement. New orders decreased for the first time since February 2016, following a trend of slowing growth since last October.
"Travel restrictions due to the coronavirus outbreak in China led to decreased tourism and was reflected in sector data for the travel & tourism industry, which saw the first drop in total new business in 16 months," it said.
According to panelists, Dubai firms reported subdued business activity, with the rate of expansion remaining at January's recent low. Companies also reduced input purchases slightly in order to streamline stock levels, as many commented that lower demand weakened their input requirements.
Business sentiment for the future output was notably swayed by the drop in new business in February. Firms were much less optimistic that output will grow over the next 12 months, with the degree of confidence reaching a 31-month low.
While firms raised hiring activity following a reduction in workforces during January, the overall increase in employment was mild, said the report.
- issacjohn@khaleejtimes.com