Dubai businesses close September with 'sharpest' growth in sales - and confidence

Dubai: Dubai businesses recorded the fastest rise in sales in 3 months during September, and which set off the biggest boost to their confidence since March 2020. In fact, the sales booked by these businesses last month was the ‘sharpest recorded in over four years’, says the latest PMI update from S&P Global.

That the local private sector was off to a good start after summer was a sentiment repeated across the board, according to market feedback. The retail and wholesale sector was one of the early gainers from the new spurt in demand and was setting themselves up for a record intake during the final three months of 2023.

On jobs, Dubai businesses are starting to slow down on their hiring. Much of this has to do with managing costs in the current high interest rate environment. The rate of job creation slipped to its weakest levels since February last, according to S&P Global.

The gains across sectors was led by ‘new clients and strengthening economic conditions’, said David Owen, Senior Economist at S&P Global Market Intelligence. “While the impact on business activity growth was muted during the month, business confidence regarding future activity ticked up further to the highest recorded since the start of the COVID-19 pandemic, signalling that firms' near-term growth expectations have improved.”

The coming weeks will see how UAE and Gulf businesses will have adjusted to the outbreak of hostilities in Israel and Gaza over the last weekend. On Monday (October 9), the local stock markets declined, but the impression among analysts is that things could easily get back into positive territory.

In September, the PMI (Purchasing Managers Index) reading was 56.1 and up from 55 in August, signaling the 'robust improvement in non-oil operating conditions across Dubai, and the strongest performance for 3 months'. (The PMI score is based around inputs such as how businesses see their spending patterns, intake of new orders and hiring during a month.)

According to industry sources, despite the heightened tensions in the region, the UAE and Gulf economies are sufficiently cushioned, and with oil prices offering that additional padding.

Last month, Dubai businesses were offering fewer discounts as they tried to stay on top of their costs. Inflationary pressures are starting to come down, notably in the retail sector. But construction industry is starting to see a return of key building material prices firming up again.  

"Rising input prices drove a solid and faster mark-up of overall business expenses, which notably tempered the rate of price discounting - indeed, output charges fell only fractionally," said Owen. "The pick-up in cost pressures also appeared to inhibit hiring and inventory growth, which could lead to some capacity constraints if demand continues to rise rapidly."

Businesses will tread carefully on their capex in the coming weeks, and will expect to sustain the pick up on new orders.