Non-oil private sector companies in Dubai signalled a return to growth at the end of 2020, amid a strong rise in business activity and a faster increase in new work.
According to the latest IHS Markit Dubai Purchasing Managers’ Index, employment numbers continued to fall as sentiment for the upcoming year was still subdued.
Cost pressures were weak in December, supporting a further drop in selling prices, albeit at the slowest rate since May.
The headline IHS Markit Dubai PMI rose above the 50.0 no-change mark in December, posting 51.0 from 49.0 in November to indicate a modest expansion in the non-oil economy, and the first seen for three months.
The improvement in the headline PMI was largely driven by a sharp rise in business activity in December, after Dubai non-oil firms curtailed output midway through the final quarter. The rate of expansion was the second-quickest throughout 2020, bettered only by July’s uptick.
David Owen, economist at IHS Markit, said: “An increase in output and new orders led to a renewed improvement in the health of the Dubai non-oil sector in December, shown by the headline PMI rising back above the 50.0 neutral mark. At 51.0, however, the index signalled only a slight expansion in Dubai’s economy, as falling employment, lower stocks of purchases and shorter delivery times all acted as drags on the headline reading.
“Looking ahead, firms continued to present a highly subdued outlook for business activity in December, despite some confidence that the confirmed effectiveness of Covid-19 vaccines should help a globaleconomic recovery in 2021.
“Businesses noted that the after-effects of the pandemic will continue to be felt across the non-oil sector, particularly as hiring remains weak and containment measures continue to stem export demand.”
Firms related the rise in output to higher sales during the month, which increased at the strongest rate since September.
There were renewed expansions in new work across the travel and tourism and construction sectors, but growth was quickest in the retail and wholesale category.
In all sectors, panellists who saw a rise in sales often linked this to the offering of price discounts.
Companies in Dubai continued to lower their inventories of inputs, but the rate of decline remained modest. Firms often highlighted efforts to clear out old stocks.
Average prices charged fell for the 32nd month in a row during December, as companies continued their efforts to secure more business by offering discounts. That said, the pace of decline in selling prices softened for the fourth consecutive month and was the least marked since May.
The overall outlook remained subdued, with many respondents expecting output to remain unchanged by the end of 2021. Anecdotal evidence suggested that some respondents were sceptical of an economic recovery in the near-term due to the continued impact of Covid-19 on business turnover.
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