Dubai’s non-oil private sector recorded the quickest growth in business activity for nearly two years in August, driven by output growth among travel and tourism and construction companies as the economy continues to recover from the Covid-19 pandemic-induced headwinds.
Dubai’s seasonally adjusted IHS Markit Purchasing Managers’ Index increased to 53.3 in August from 53.2 in July. A reading above 50 indicates economic expansion, while anything below points to a contraction. The index registered a higher reading only once in the past 21 months, in April 2021, a statement said on Thursday.
As a result, companies in Dubai, the commercial and trading centre of the Middle East, also increased their employment levels at the fastest rate since November 2019 as they looked to rebuild staff capacity in response to greater sales volumes and backlogs of work.The economy is solidifying its recovery from the pandemic, especially as a relaxation of travel measures drove tourism numbers higher and boosted consumer demandDavid Owen, economist, IHS Markit
“The Dubai non-oil economy enjoyed another strong overall improvement in August, driven by a marked rise in output levels that was the fastest seen since September 2019,” David Owen, an economist at IHS Markit, said. “This suggests that the economy is solidifying its recovery from the pandemic, especially as a relaxation of travel measures drove tourism numbers higher and boosted consumer demand.”
Dubai will also stand to gain from the Expo 2020 later this year, which businesses hope will drive spending and growth even higher, Mr Owen added. “With this in mind, firms expanded their staff capacity in August, leading to the sharpest rise in employment since late-2019.”
The pace of Dubai’s recovery has picked up on the back of wide-scale testing and vaccinations.
Key sectors such as tourism and property have made a significant recovery on the back of Dh7.1 billion ($1.93bn) stimulus pumped into the economy since the onset of Covid-19. Dubai’s economy is expected to grow by 4 per cent this year, according to government data.
Business confidence in Dubai has also hit a seven-year high as companies in the emirate expect business conditions to improve before the Expo 2020 world fair begins, according to a July survey by the Dubai Chamber of Commerce and Industry.
“We remain optimistic that private sector business conditions will improve further in Q4 2021 as Expo 2020 gets underway and the recent further easing of travel restrictions boosts visitor numbers during the high season for the travel and tourism sector,” Emirates NBD, Dubai’s largest lender, said on Thursday.
Dubai’s output index jumped to its highest reading since September 2019 to signal a sharp expansion in non-oil output. Companies attributed this to improving new business volumes. However, the overall pace of new order growth eased slightly since the start of the third quarter, IHS Markit data showed.
Growth was particularly driven by Dubai’s travel and tourism industry in August, with businesses seeing the sharpest increases in activity and new work in more than two years as looser travel restrictions drove an influx of tourists.
The easing of travel restrictions to and from the UAE will further boost the recovery of the country’s aviation and hospitality sectors this year, according to Abu Dhabi Commercial Bank.
Requirements governing travel to the UK and India, two of the UAE’s top source markets, have been relaxed and this is expected to draw more tourists to the Gulf nation, the lender said last month. “The next phase of the UAE’s economic recovery will be driven by the externally facing service sectors,” ADCB said.
Hotels in Dubai recorded a surge in occupancy rates in June, boosted by Eid staycations, a pick-up in regional travel and hoteliers cutting prices to attract guests over the summer season, according to research by Emirates NBD and figures by hospitality data and analytics specialist STR.
Output growth among Dubai’s construction companies was also strong, having accelerated to a 13-month high, IHS Markit said.
Dubai registered 5,780 property sales transactions worth Dh14.97bn ($4.07bn) driven by demand in the secondary market, making it the best August in total sales since 2009, according to the listings portal Property Finder.
“Expansions were also recorded in purchasing activity and inventories during August. Delivery times, meanwhile, lengthened for the seventh consecutive month, although the downturn was only marginal,” IHS Markit said.
Input cost pressures continued to tick higher in August, largely due to an increase in purchase prices for fuel, raw material and freight prices. However, non-oil companies lowered their output prices to retain clients and win new contracts, according to the statement.
“The pace of discounting quickened from July to the fastest in five months, but remained slower than the average recorded in 2020,” IHS Markit said.
Companies surveyed by IHS Markit expressed more confidence regarding future output in August compared to the prior three months, with respondents citing expectations of increased new business due to Expo 2020, easing Covid-19 restrictions and the ongoing vaccination programme.