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Business Markets

Dubai businesses records sharp rise in new orders, with March PMI at 33-month high

Dubai's private sector activity shows resilience to higher raw material costs



Dubai's businesses are ready for a post-Expo bounce. The March PMI readings show gains are being made in winning new orders and resilience to higher raw material and fuel costs.
Image Credit: Supplied

Dubai: Confidence among Dubai-based businesses is at its highest point since December, as the private sector recorded a surge in new orders during March. This sets up businesses for what could be a strong post-Expo bounce, though they will need to keep factoring in higher costs on energy and fuel bills.

Of particular interest are the continued gains in new business growth, though this is running at a slightly slower pace than was seen in the closing weeks of last year. The Dubai PMI (Purchasing Managers Index) had a reading of 55.5 for March, which is the highest since June 2019, according to the latest report from IHS Markit, the consultancy. It was 54.1 in February.

The index reading suggests that the “health of the non-oil private sector had improved sharply, and to a greater extent than seen on average over 12 years of survey data”, according to the report.

"The Dubai PMI moved clear of its previous post-lockdown high in March, registering the strongest performance in the non-oil sector since June 2019,” said David Owen, Economist at S&P Global. “The result rounded off another strong quarter in which relaxed pandemic measures and the Expo 2020 have brought increased economic activity and tourism demand.”

The degree of optimism shown by local businesses too has picked up for a second straight month to the "highest since December, and was slightly above the average seen in 2021".

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Jobs too make gains
Businesses in Dubai were reporting higher intake of new employees during March. This makes it a fourth straight month of such an expansion on the workforce side.

Key pillars of the Dubai economy were also in expansion mode, justifying new job creation.

"Output growth in both the travel and tourism and construction sectors also quickened to the highest since June 2019, with the latter driven by a strong drive among contractors to complete outstanding projects," said David Owen of S&P Global. "Wholesale and retail activity likewise rose to a greater extent than in February."

Revival for two major sectors

The numbers seem to suggest as much. Output gains in two key sectors – travel and tourism and in construction – are running at their highest rates since June 2019. The construction sector has seen a revival of sorts, led to a large extent by new real estate projects in the offplan space. The full benefits from these launches should be more visible from the third quarter onwards.

Cost pressures

Amidst the boost and optimism, businesses cannot lose sight of the cost aspect. "The global surge in commodity prices had an impact on Dubai businesses during March, with costs rising at the quickest rate in three months,” said Owen. “While some firms opted to pass these expenses onto clients, the urge to support sales growth meant that average selling prices continued to fall."

  1. During March, input costs and output prices continued to move in opposite directions. The former saw an increase for the 14th straight month, as many businesses highlighted a sharp rise in energy and raw material prices after the Ukraine crisis.
  2. The rate of cost inflation is the fastest seen in the year-to-date.
  3. Overall inventories held by Dubai-based businesses rose for the first time since November last, although the rate of accumulation was mild, according to the IHS Markit report. The build-up of stocks was helped by a decrease in supplier lead times for a third month running, marking the longest sequence of improving vendor performance since the middle of 2020.
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