Dubai records strongest demand growth in 18 months

Last updated on May 10, 2021 at 11.36 pm

Dubai's private sector is witnessing the strongest demand growth in 18 months on the back of a faster overall recovery and higher business confidence facilitated by effective Covid-19 vaccine rollout.

A purchasing managers' survey revealed that during April, Dubai's non-oil private sector showed a speedier rebound as business conditions were strengthened by marked increases in output and new business.

"Most notably, sales growth reached the quickest since October 2019, supported by higher business confidence as the Covid-19 vaccine roll-out continued at pace," said the IHS Markit Dubai Purchasing Managers' Index report.

The PMI is derived from individual diffusion indices which measure changes in output, new orders, employment, suppliers' delivery times and stocks of purchased goods.

David Owen, economist at IHS Markit, said the recovery in the Dubai non-oil economy sped up in April, as output and new order growth returned to pre-Covid trends and business confidence strengthened to the highest in over a year.

"Travel & tourism firms recorded the most notable bounce back in performance, amid increasing hopes of a rise in tourism activity later in the year, boosted by the rapid vaccine roll-out," said Owen.

Dubai Tourism Chief Executive Issam Kazim said last week that he was very optimistic business and leisure travellers would return this year, though the pandemic made it difficult to predict exactly how many. Dubai, a trade and tourism hub which has kept its borders open since reopening last July, saw 1.26 million visitors in the first quarter, while last year the number of visitors fell 67 per cent to 5.5 million. "We are very optimistic on the numbers for the year with key events, like the multi-month Expo 2020, which starts in October, helping to attract visitors to Dubai," Kazim said.

After recording a decline throughout the first quarter, new work rose at the strongest rate since the end of 2019.

"With demand strengthening, non-oil firms brought the recent run of falling output charges to an end in April, as prices were lifted for the first time in three years. Cost inflation meanwhile eased from March and was slower than the rate of selling charge inflation. This signals a slight improvement to operating margins after a long period of pressure from price discounting," said Owen.

The Dubai PMI rose from 51.0 in March to 53.5 in April, signalling a solid expansion in the non-oil private sector economy. The reading was also the highest recorded since November 2019, suggesting the economy is moving closer to its pre-Covid growth trajectory.

According to the survey, the most positive result in the latest survey was the New Orders Index, which pointed to the quickest rise in customer sales for a year-and-a-half. "The upturn was helped by strengthening business optimism about the coming year as the impact of the Covid-19 pandemic is expected to recede."

Another major catalyst to Dubai's widely anticipated speedy recovery is the real estate sector which has started to show strong signs of rebound over the past few months. Dubai's fast rebounding property sector recorded a total sales transaction value of Dh10.97 billion in April 2021, the highest since March 2017, according to a real estate portal.

April also witnessed 4.2 per cent more than March 2021 in terms of volume and 0.6 per cent more in terms of value. This brings the year to date total to 16,577 transactions worth Dh36.12 billion, Property Finder said in its report.

Abdulla bin Touq Al Marri, the UAE's Minister of Economy, has said the positive growth rates of the national economy would be restored by the end of 2021, estimating a 2.5 per cent growth in real GDP, and 3.6 per cent in non-oil real GDP. These figures are expected to rise to 3.5 per cent growth in real GDP, and 3.9 per cent growth in non-oil real GDP in 2022, he said, citing estimates released by the Central Bank of the UAE.

The PMI survey shows faster increases in new work in the wholesale & retail and construction industries compared to the previous survey period. "As a result, non-oil private sector companies raised output for the fifth consecutive month in April, with the rate of expansion quickening to its highest since July 2020. There was also a third increase in staff numbers in four months, reflecting efforts to rebuild business capacity," said the report.

While demand for inputs rose solidly at the start of the second quarter, which put pressure on suppliers as average lead times lengthened to the greatest extent since last May, some firms found that input supply struggled to match demand due to global shortages, leading to a slight increase in overall costs, said the PMI report. -

Issac John Editorial Director of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.