Dubai PMI slips but still strong in September

The S&P Global PMI survey for Dubai slipped in September, falling to a three-month low of 56.2, down from 57.9 in August. However, while the headline reading has taken a leg lower it should be looked at in the context of the recent readings, with the August figure representing a three-year high. Moreover, the index remains above the long-run series average and continues to point towards a robust expansion in the private sector economy, albeit slowing from levels seen earlier in the year.

Looking at the survey’s subcomponents, there was a similar trend to the headline figure – and, indeed, the recent PMI releases for the national level and Saudi Arabia released last week – whereby the results came in lower than the previous month but still at strongly expansionary levels. Output declined but was still one of the two highest readings of the past 38 months, and while new work also fell, it remained at high enough levels to suggest a healthy flow through the coming quarter. Input prices turned positive once again, while output prices continued to decline in the competitive environment, but the margin pressures will have been slighter than seen earlier in the year. Even in this environment employment expanded for the fifth consecutive month, albeit marginally, and siness expectations picked up, rising to a three-month high.

The September reading makes for the strongest quarter of growth in several years, supporting our view that Dubai and the UAE will remain among the global outperformers in 2022. We have revised up our forecast for 2022 UAE real GDP growth to 7.0% from 5.7% previously. 

Dubai PMI

Source: S&P Global, Emirates NBD Research

Travel & Tourism

The tourism sector had been the strongest performing of the three industries covered by the PMI survey in recent months, but in September it fell to second place as the headline reading dipped to an eight-month low of 55.3. The sector is expected to enjoy a fillip from the FIFA World Cup in Qatar through the end of the year, but the deteriorating global growth outlook and ongoing dollar strength could start to weigh on demand. New work also fell to the lowest level since January. Nevertheless, business expectations improved, to a 10-month high, and employment was positive for the fifth month running, albeit at a marginal pace.

Construction

Construction was the sector with the slowest growth in September as the headline reading fell to a four-month low of 53.3, down from 54.6 in August – though last month’s reading was the highest since mid-2019 and the data remains supportive of growth in the industry as new work remained positive. As global commodity prices rose once more, input costs picked up again after having turned negative in August, but this was still at a far softer level compared to the January to July period. Firms continue to pass these higher costs on to customers, with output prices positive for the second month running, after eight months of discounting prior to that. Business optimism rose in September but remains low compared to earlier in the year, and higher interest rates are likely to weigh on the sector in the quarters to come.

Wholesale & Retail

Wholesale & retail trade was the strongest of the three last month, as it slipped only marginally compared with August, coming in at 57.3 down from 57.4. Output accelerated compared to the previous month, as did new work, suggesting that growth will be maintained through the remainder of the year. However, this continues to be supported by aggressive discounting by firms, as output prices were slashed at the sharpest rate since November 2018. With input prices ticking up again, albeit only marginally, this will weigh on firms’ margins. Employment expanded for the 15th month in a row – faster than in August, but still at a marginal rate. Business expectations remained static on the previous month.