Dubai records robust business expansion

Dubai recorded a robust expansion in business conditions across the non-oil private sector, defying the overall trend across the UAE that showed the weakest expansion in business activity for three years in September, according to the latest Purchasing Managers’ Index report.

In Dubai, overall activity levels rose at the fastest pace in four months, despite a slower upturn in new business volumes. “The expansion led non-oil businesses to increase staffing and inventories to greater degrees than in August. Supplier performance also improved, though to a less extent amid reports of customs delays,” the S&P Global UAE Purchasing Managers’ Index (PMI) report said.

Dubai’s GDP topped Dh115 billion in the first quarter of 2024, with its economy growing 3.2 per cent compared to the same period last year. Key sectors, including transportation, financial services, trade, communications, hospitality, and real estate all saw significant expansion during Q1 2024. Key sectors, including transportation, financial services, trade, communications, hospitality, and real estate all saw significant expansion during Q1 2024. Both transportation/storage and financial/insurance sectors led the charge with growth rates of 5.6 per cent. The trade sector expanded by 3.0 per cent, information/communications (3.9 per cent), accommodation/food services (3.8 per cent), and real estate (3.7 per cent). The growth trend echoes the success of 2023, where Dubai’s GDP soared to Dh429 billion, marking a notable 3.3 per cent increase from the previous year’s figure of about Dh415 billion

On prices, the Dubai survey data indicated a sharp rise in overall input costs during September, albeit with the rate of inflation easing to a five-month low. Output prices also increased, as firms attempted to pass-through costs to customers. Notably, the latest rise in charges was the quickest since the start of 2018, the PMI survey showed.

Across the UAE, activity and new orders improved at softer rates while employment growth was the weakest since December 2022 as output charges recorded the fastest rise in more than six and a half years, S&P data showed.

The seasonally adjusted PMI – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – dipped to 53.8 in September from 54.2 in August.

“The UAE PMI continued to show a loss of momentum in the non-oil private sector, with growth having softened considerably since the start of the year. Businesses faced further challenges with the completion of new work, despite a slowing of sales growth and a strong uplift in purchases,” said David Owen, senior economist at S&P Global Market Intelligence.

Owen said competition remained another area of difficulty, with panellists reporting that tougher market conditions had led to a more cautious outlook for the upcoming year – output expectations are now at their lowest since early 2023. “The survey data also suggested that firms opted to maximise revenues whilst sales are still strong, as output charges rose at the fastest rate for over six-and-a-half years. This was partly due to cost pressures remaining strong in September, though there was a bit of relief on this front compared to the last few months, which could be a sign that the inflationary trend will lessen,” he said.

Across the UAE, a recent pivot towards selling price hikes persisted in September, as businesses raised charges at the fastest pace since January 2018. The uplift followed another sharp increase in costs, with shipping, petrol, technology and maintenance costs often reported as sources of inflationary pressures, said the report.

“Despite indicating robust gains, rates of growth in activity and new business across the non-oil economy receded at the end of the third quarter. Business activity rose at the slowest pace since September 2021, despite widespread reports from survey members that rising demand had boosted output. Similarly, new business levels received by non-oil firms rose at a sharp pace during the latest survey period, helped by a solid increase in export sales and reports of strong local market conditions. However, the rate of expansion decelerated and was the second-weakest in a year and a half,” S&P said.

Some companies cited tough competition as having hampered sales. Output predictions for the year ahead moderated to their weakest in 18 months. “With new order growth softening, businesses reported fewer hires in September, driving the mildest rise in total employment since the end of 2022. Inventories of inputs were left unchanged, continuing the relatively muted trend for stocks over the third quarter,” said the report.