Dubai PMI declined in September on weaker new orders

Khatija Haque - Head of Research & Chief Economist
Published Date: 11 October 2021

 

The Dubai PMI declined to 51.5 in September from 53.3 in August, the lowest reading since June. The softness was largely in new work which declined for the first time since February.  Firms attributed this to weaker client demand, but business output did increase at a solid rate last month despite the slowdown in new work.  Employment was broadly unchanged in September. 

Inflation pressures eased as input costs rose only fractionally in September and firms reduced selling prices at the fastest pace in a year in a bid to remain competitive. Stocks of purchases declined slightly last month and supplier delivery times increased again on the back of global supply chain issues.  

Firms were the most optimistic about their future output in September than they have been since April, with Expo 2020 expected to drive increased sales over the next six months.

Dubai PMI and key components

Source: IHS Markit, Emirates NBD Research

The travel and tourism sector saw both business activity and new work growth slow in September from August, but both indices remained in expansion territory and firms were more optimistic about the outlook for the coming year. However, employment in the sector declined fractionally last month. Both input costs and selling prices in the sector declined last month. 

The wholesale and retail trade sector also saw slower growth in business output and new work, which contributed to the decline in the headline sector index to 51.3 from 53.0 in August. However, employment increased marginally and firms added to their stocks of inventories. Input costs increased at the fastest rate in six months but firms further reduced average selling prices for the 14th consecutive month. 

The construction sector saw output rise sharply in September, most likely due to projects that needed to be completed ahead of the Expo 2020 opening in October. However, the pipeline of new work declined and firms in the sector were neutral about the outlook for the coming year. Input cost inflation moderated, and construction sector firms raised selling prices for the first time since March 2021.

The September PMI survey was softer than we had expected but we do anticipated faster growth in Q4 as Dubai heads into its high tourism season and global travel restrictions continue to ease. Expo 2020 should provide a boost to domestic demand as well.