Dubai sees in July first sign of revival in 5 months
For the first time in five months, Dubai's economy showed signs of revival with business activity picking up in July.
The latest Purchasing Managers' Index survey data shows both output and new business both rising at quicker rates in July albeit employment fell further as companies prepared to manage costs.
The survey results heralding a gradual recovery came as Dubai Economy, in partnership with the Mohammed bin Rashid School of Government launched 'The Great Economic Reset Programme' as part of the efforts to reshape the emirate's economy and reset it towards a more agile, sustainable, resilient, and inclusive post-pandemic future.
The IHS Markit Dubai PM index that covers the emirate's non-oil private sector economy edged above the 50.0 neutral mark for the first time in five months during July. At 51.7, the index was up from 50.0 in June, and pointed to modest growth in the Dubai non-oil private sector economy, said the survey report.
The survey reflects changes in output, new orders, employment, suppliers' delivery times and stocks of purchased goods.
David Owen, economist at IHS Markit, said July data for the non-oil private sector signalled 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."
In July, businesses boosted 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 although the rate of reduction did slow from June," said Owen.
He said businesses optimism about a rise in activity in the next 12 months weakened in July despite the non-oil economy gaining traction. Uncertainty around the length of a recovery from the crisis is growing. Many businesses still expect to recover output by summer 2021, however, the disparity on this appeared to widen, said Owen.
The survey report said improved business conditions were largely driven by a solid increase in new work received by Dubai companies in July. 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.
In July, companies reported that they had received new projects and increased their marketing activity. Subsequently, Dubai businesses reported a robust expansion in output at the start of the third quarter, with the rate of growth quicker than that seen in June and the best recorded in 2020 so far.
According to the survey, 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 nonetheless recorded the first rise in activity since February amid government efforts to restart tourism. Less positively for the Dubai non-oil sector, July survey data signalled a fifth successive fall in employment. Job losses eased back from June but were still solid overall.