Business growth in Dubai’s non-oil private sector has strengthened in October helped by new order growth, recent figures released by IHS Markit Dubai Purchasing Managers’ index revealed. The employment growth also improved to 21-month high.

“The upturn translated into greater hiring activity, marking the second successive rise in workforce numbers. Moreover, the rate of job creation strengthened to a 21-month high, despite being marginal overall,” highlighted the report.

The seasonally adjusted IHS Markit Dubai Purchasing Managers’ Index (PMI) rose from 52.6 in September to 54.6 in October, signalling a sharp improvement in operating conditions at non-oil private sector firms in Dubai.

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“Key to the uptick was a strengthening of new order growth, which improved for the first time in five months amid higher demand at a number of surveyed companies,” said the report.

Sectoral data showed an acceleration among travel and tourism firms, while construction and wholesale & retail firms reported a weaker uplift in sales.

Panellists frequently mentioned that increased price competitiveness helped sales to rise in October. Selling charges were reduced for the eighteenth month in a row, with the pace
of decline the quickest since February 2016. On the other hand, Dubai firms reported a fractional drop in their total input costs during the month.

Meanwhile, Dubai non-oil firms built up their inventories at the start of the fourth quarter, as several panellists noted an anticipation of larger orders in the future. The overall expansion was solid and the fastest since April.

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However, increased purchasing activity placed greater pressure on suppliers, with lead times improving at the softest rate since the series began in January 2010. Alongside higher demand, some respondents noted that a delay in payments to suppliers led to slower deliveries.

After reaching a nine-month low in September, Dubai firms’ projections for future output improved during October. “Most firms remained optimistic of a boost to activity, citing
expectations that domestic market conditions will stabilise and drive demand higher. Anticipation for greater activity in the run-up to the Expo 2020 was also mentioned,” added the report.

Commenting on the latest survey results, David Owen, Economist at IHS Markit, said:
“Business conditions in Dubai strengthened at an accelerating pace in October, as the headline PMI rose for the second month running from August’s recent low. Driving the increase was a notably sharper rise in new work, concentrated on the travel & tourism sector.”

“However, a good proportion of panellists resorted to further price drops during October, in order to achieve higher sales, as has been the case for the past yearand-a-half. More importantly, the rate at which selling prices declined was the fastest since February 2016, underpinning the challenge of deflation that the UAE has experienced this year. Cost pressures are weak though, while output levels are still rising at a sharp pace, suggesting that businesses are coping with the squeeze on their margins for the time being,” he added.