Dubai business conditions improve as coronavirus cases spike

UAE

Dubai business conditions improved for the third month in a row in September even as a renewed rise in cases of the Coronavirus, which poses a threat to the city’s recovery.

Non-oil private sector activity in the Middle East business center performed better amid a rise in activity and new business, according to IHS Markit. The PMI rose to 51.5 last month from 50.9 in August, staying above the 50 level that separates deflation from growth.

  • Employment declined at its slowest rate in seven months, as business outlook improved slightly
  • The pace of new business was faster than in August and demand growth was at the highest level in 10 months
  • A sharp increase in new orders in the wholesale and retail sector; Construction work witnessed a ‘modest rise’
  • The travel and tourism sector continued to decline, but at a slower pace since February
  • Expectations for further growth were largely associated with a rebound in sales as lockdown measures were lifted

David Owen, an economist at IHS Markit said that the PMI has failed to lift off or signal any strong rebounds in output so far, with firms often initiating price cuts in order to drive sales higher. Meanwhile, employment data signaled a cautious outlook as firms often shed workers to manage cost pressures and enable discounting.

In the United Arab Emirates, of which Dubai is a part, the recent increase in the number of cases raises the possibility that new restrictions will be needed to stop the infection. The country’s central bank is already expecting that the OPEC member’s economy will contract by 5.2% this year, and suffer a deeper contraction than initially expected.

The recent rise in Covid-19 cases across the UAE and the threat of re-imposed restrictions could lead to a further dip in activity later this year. Firms will thus be wary of expanding too much or too quickly.