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New order growth weakens in Dubai

Christian Fernsby ▼ | January 14, 2020
Growth in the Dubai non-oil economy weakened in December, amid the slowest rise in new orders for nearly four years.
Dubai street
Dubai   The latest reading indicated a modest improvement in business conditions
Employment increased only marginally, but business activity remained strong as firms prepared for expected investment and higher sales in the coming year.

Topics: Dubai

The headline IHS Markit Dubai Purchasing Managers' Index™ (PMI) is derived from individual diffusion indices which measure changes in output, new orders, employment, suppliers’ delivery times and stocks of purchased goods.

The survey covers the Dubai non-oil private sector economy, with additional sector data published for travel and tourism, wholesale and retail and construction.

The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index™ (PMI) fell to a four-month low of 52.3 in December, from 53.5 in November.

The latest reading indicated a modest improvement in business conditions in the Dubai non-oil economy.

Contributing to the slowdown was a weaker increase in new orders, with the rate of growth the slowest in nearly four years of consecutive monthly expansions.

Firms often highlighted that softer economic conditions reduced clients' spending power.

Nevertheless, business activity continued to rise at a strong pace, with the rate of increase quickening from November.

Firms also raised purchasing activity at the sharpest rate in four months, as some panellists sought to grow inventory levels.

On a sector basis, output growth accelerated among construction and travel and tourism firms.

The other monitored sector, wholesale and retail, recorded the weakest expansion in output since February 2016.

Meanwhile, employment in the Dubai non-oil economy increased for the fourth month running in December.

However, the rise in job numbers was the joint-slowest in this period, and marginal.

As such, backlogs continued to grow, albeit only modestly.

In response to softer demand growth, Dubai companies extended price discounting strategies at the end of the year.

Latest data signalled a solid fall in average charges, albeit one that was the least marked since September.

By contrast, input costs increased for the second month running in December.

The rate of inflation quickened from November amid a renewed rise in staffing costs.

Higher prices for equipment was also mentioned.

Looking ahead, the level of positive sentiment for output in 12 months' time fell for the first time in three months during December.

That said, around 64% of respondents still expect business activity to grow, mainly amid hopes of market stabilisation and higher local investment as the Expo 2020 approaches.

Tourism numbers are also forecast to strengthen in the coming year.