Dubai PMI signals slower start to 2021

Khatija Haque - Head of Research & Chief Economist
Published Date: 09 February 2021

Dubai’s PMI reading slipped to 50.6 in January from 51.0 in December on the back of slower growth in output/ business activity and new work. New work growth was the weakest in eight months as firms cited softer demand.

Despite the slowdown in activity and new work, employment in the private sector increased slightly in January, the first rise since February 2020. Both input costs and selling prices declined in January.

Firms were more optimistic than they had been in the prior four months, but the level of optimism was low relative to the series history, as uncertainty about the near term economic outlook remained high. Tighter global restrictions on services sectors and travel as well as rising domestic coronavirus numbers weighed on sentiment last month.

Dubai PMI slipped in January

Source: IHS Markit, Emirates NBD Research

The wholesale and retail trade sector index eased to 51.3 in January from 52.6 in December on slower growth in business activity and new orders. However, employment in the sector increased for the first time since the pandemic began. Businesses were also more optimistic about the outlook for the next twelve months. Input costs for the sector declined at the fastest rate on record, and this was passed through in lower selling prices in January.

The travel and tourism index slipped back into contraction territory in January, as global restrictions on travel were tightened, leading to lower output and new work in the sector. Employment contracted for the 14^th month in a row. Businesses in the sector were neutral about the outlook for the coming year.

The construction sector saw a fractional improvement in business conditions in January, as the sector index rose to 50.3 after three months of sub-50 readings. Activity in the sector increased for the second month in a row, and at the fastest pace since September 2020. New work growth was modest, but positive. Businesses in the sector were also more positive about the outlook for the next year, compared with Q4 2020. Employment in the sector continued to decline in January but at the slowest rate since July.