Dubai PMI moves back into expansion territory in December

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

 

The Dubai PMI rose to 51.0 in December, indicating a modest expansion in the non-oil private sector for the first time in three months. Business activity and new work increased in December, with the rise in activity being the strongest since July.  However, employment in the private sector continued to decline in December.  Input costs were broadly unchanged from November, and selling prices declined only slightly. All the sector surveys showed an improvement from November.

Dubai PMI components

Source: IHS Markit, Emirates NBD Research

The travel and tourism index rose above the neutral 50-level for the first time since January 2020, reaching 50.2 in December. New work increased for the first time since the pandemic started and output increased slightly as well.  Dubai remained open even as Europe, the UK and other countries in Asia went into renewed lockdowns over the holiday period, which made it one of the few cities seen as a tourist destination in the final month of 2020.  However, firms in the sector continued to reduce prices according to the survey.  Firms were also slightly more optimistic about their prospects over the coming year. 

The wholesale & retail trade sector index rose to 52.6 in December, the highest reading since August 2020. Business activity rose at the fastest rate since July, while new work also increased at a similar rate to November. Employment declined only marginally in the sector last month.  While firms did reduce selling prices in December on average, the rate of price decline was the weakest since July. 

Only the construction sector remained in contraction territory in December, despite marginal increases in activity and new work.  The main drag on the construction sector index was employment, which declined at the fastest rate since October. Nevertheless, the sector index rose to 49.7 in December from 48.5 in November, a three-month high.

We expect Dubai’s economy to continue to recover this year, as vaccines are rolled out and as the global economy is likely to gain momentum from Q2 2021.  Low interest rates and a weaker US dollar should also be supportive of domestic growth this year.  However, the transport and tourism sectors may take longer to rebound to pre-pandemic levels. We retain our forecast of 3% GDP growth for Dubai in 2021, following an estimated -6.9% contraction in 2020.