Dubai's business activity shows 'tentative' signs of recovery in June

Dubai: The easing in COVID-19 restrictions showed up favourably on Dubai’s economy during June.

Private businesses have seen a “tentative” rise in new orders – but that work is now being done by significantly reduced workforces. Employment numbers have contracted for a fourth straight month.

Even then, “Confidence about the business outlook continued to improve, reaching the highest since March,” according to the latest purchasing managers index (PMI) issued by IHS Markit, the research firm.

"The latest survey data offered hopeful signs for the Dubai non-oil private sector,” said David Owen, Economist at IHS Markit. “The headline PMI was 50 in June, signalling neither growth nor contraction, but marking a notable improvement from the severe downturn seen during the coronavirus pandemic.”

Immediate beneficiaries from the easing of restrictions were the construction, wholesale and retail sectors. The HIS Markit numbers show them as having returned to “activity growth”.

While travel and tourism did not show any such positives, business expectations on the sector turned positive for the first time since March.

Worrisome job situation

Despite more orders coming in, the "hit to firms' revenues from the lockdown period meant several companies laid off staff to lower cost pressures," the survey adds. "The drop in employment was sharp, and broadly in line with the average seen since March."

Not raising hopes too high

Though "rising from a record low in April, business expectations were nonetheless much weaker than prior to the onset of the COVID-19 pandemic," the survey notes.

June’s 50 score represents a major improvement on May’s 46 reading. A score below 50 shows an economy and business activity in contraction mode.

"Firms direly need a boost to cash flow, as many have been left struggling with low revenues and high cost burdens in June," said Owen.