Dubai economy stabilises in June

Business conditions in Dubai stabilised in June, with the headline Dubai PMI rising to 50.0 from 46.0 in May. While business activity recovered as restrictions on movement and business operations were further eased last month, new work increased only slightly. Firms continued to reduce headcount last month as they looked to curb costs on the back of lower revenues during the lockdown period. The employment index fell to 45.7 in June from 46.8 in May. However, business expectations improved with more panelists anticipating higher business output in a year’s time than in May. 

Dubai PMI: Output recovers but employment declines

Source: IHS Markit, Emirates NBD Research

The sector surveys showed business conditions in the wholesale & retail trade and construction sectors starting to improve in June, but travel & tourism remained in contraction territory. The latter is likely to start recovering from July as Dubai re-opened to foreign tourists from the  July 7th.

The wholesale & retail sector index rose to 53.0 in June from 47.4 in May. While output and new work improved solidly from May, employment in the sector continued to decline, albeit at a slower rate than in the prior three months. Selling prices increased slightly for the second month in a row, as firms’ purchasing costs rose at the fastest rate since September 2019 and some of this was likely passed on to buyers. Firms in the wholesale & retail sector increased inventories in June for the first time in four months as supply chains normalised. Business optimism in the sector also improved in June, with this index at a three-month high.

Wholesale & retail trade sector survey

Source: IHS Markit, Emirates NBD Research

Construction activity rebounded sharply in June as lockdown measures were further relaxed. However, new work declined for the sixth straight month, and employment in the sector fell at the fastest rate in the series history. Input costs increased slightly in June but firms again offered lower prices to remain competitive. Business optimism about the next twelve months improved slightly from May, but remains below pre-coronavirus levels.

Travel & tourism remained in contraction territory in June, although the sector index rose to 44.3 from 43.7. Activity in the sector declined at a slower rate than in March through May, but new work and employment declined in June at a faster rate than in May. The decline in employment last month likely contributed to overall lower input costs for firms in the sector and this was passed on through lower selling prices. Many hotels opened to residents in June, offering discounted rates to encourage domestic demand. Firms in the travel & tourism sector were slightly more optimistic in June about the outlook for the next 12 months with the opening of Dubai to foreign tourists from July 7th potentially providing a boost.