Business conditions in Dubai improve at a faster rate in Q1

The Dubai PMI pointed to an uplift in growth momentum at the end of the first quarter of 2023, as firms placed greater emphasis on building capacity levels to support an expansion in output.

This was reflected in stronger increases in both jobs and inventories, with growth rates reaching multi-year records. However, the latest data also indicated signs of slippage in demand growth, as new orders rose to the least extent since January 2022.

The headline S&P Global 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 headline index rose to 55.5 in March, up from 54.1 in February and to the highest level in five months.

The index signalled a sharp improvement in non-oil business conditions, with the uptick supported by stronger growth in output, employment and stocks of purchases, alongside tighter supply side conditions.

Dubai companies continued to report a marked improvement in client demand during March, resulting in a substantial increase in activity that was the sharpest since last September.

New business inflows also rose sharply, although the rate of expansion eased slightly from February and was the least marked in just over a year.

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

Sector data indicated that the wholesale & retail and travel & tourism sectors had lost momentum from their post-COVID peaks in 2022, with sales growth in the former reaching a 14-month low.

David Owen, Senior Economist at S&P Global Market Intelligence, said: “The Dubai PMI picked up for the first time in three months in March, rising to 55.5 from a 12-month low of 54.1 in February, as companies reported greater efforts to build supply-side strength in light of a further rapid expansion in activity levels.

The subsequent increases in staffing levels and inventories of materials and components were the sharpest seen in around five years, allowing firms to increase their output to the greatest extent for six months.

“However, a further slowdown in new business growth shows that demand growth is continuing to weaken from its post-COVID peak, with notable slippage seen in the wholesale & retail and travel & tourism sectors. This suggests that rapid activity growth may not be sustained, which was reflecting in a slight drop in future output expectations.”