Dubai non-oil economy dips but output remains unchanged despite global slowdown

Output growth in the emirate remained unchanged last month

The Burj Khalifa skyscraper, center, stands above other skyscrapers on the city skyline in Dubai, United Arab Emirates, on Tuesday, Dec. 24, 2019. Dubai’s spending will surge next year as it prepares for World Expo 2020, according to the budget the government approved on Sunday. Photographer: Christopher Pike/Bloomberg
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Dubai’s non-oil private sector economy slowed down in February, however output growth in the emirate remained unchanged despite a global economic slowdown.

The seasonally-adjusted IHS Markit Dubai Purchasing Managers' Index dropped to a four-year low of 50.1 in February from 50.6 a month before. A reading above 50 indicates economic expansion and below points to a contraction.

The February results signal broadly unchanged business conditions midway through the first quarter of the year, according to the survey.

The headline PMI was held back by weaker sales and lower inventories at Dubai companies, while output rose only modestly last month. The construction sector fared the worst, recording a moderate decline in business conditions, while wholesale and retail registered a slight improvement.

New orders decreased for the first time since February 2016. Some panellists noted the impact of travel restrictions in the wake of the coronavirus outbreak on travel and tourism sector, which saw the first drop in total new business in 16 months.

“The headline reading of 50.1 signalled that business conditions broadly stagnated, driven by the first monthly fall in new orders in four years,” said David Owen, an economist at IHS Markit. “With the [coronavirus] outbreak appearing to intensify, this poses an additional challenge ahead for Dubai's economy.”

Companies last month also reduced input purchases slightly in order to streamline stock levels. Vendor delivery times lengthened, with some panellists noting delays on imports sourced from China, according to the survey.

Output prices dropped for the 22nd month running during February. The rate of decrease was moderate, however, and the softest since last September. On the positive side, input costs were broadly unchanged from January.

Companies also raised hiring activity following a reduction in staff during January. The overall increase in employment "was mild" though, IHS said.

Business sentiment for future output rises was affected by the drop in new business in February. With the global economic slowdown and threats looming from the coronavirus, companies were less optimistic that output will grow over the next 12 months.