Dubai's non-oil economy stabilises in June; business activity rises

Non-oil private sector businesses in Dubai saw a tentative rise in new work in June as the region relaxed restrictions to stop the spread of COVID-19, signaling an end to the recent downturn across the emirate's economy.

The seasonally adjusted IHS Markit Purchasing Managers' Index (PMI) reading for Dubai rose from 46.0 in May to the neutral 50.0-mark in June, to signal no change in overall business conditions at the end of the second quarter. Nevertheless, this ended a three-month downturn in the Dubai non-oil economy that was the worst seen in the series history and caused by the coronavirus pandemic.

A reading above the 50-mark is an indicator of economic expansion.

David Owen, Economist at IHS Markit, said: “The latest PMI survey data offered hopeful signs for the Dubai non-oil private sector. Business activity was back in positive territory as firms were given a welcome boost from the relaxing of lockdown measures.”

However, the rise in new work was subdued, as some companies still found that market conditions were weak.

At the sector level, construction and wholesale and retail returned to business activity growth in June. By contrast, travel & tourism remained in decline, although business expectations turned positive for the first time since March.

“Some sectors were on the path back to normality, according to survey respondents, though others presented a more cautious picture, finding that demand in some areas, notably travel & tourism, was still extremely weak,” Owen said.

Despite higher demand, the hit to firms' revenues from the lockdown period meant several companies laid off staff to lower cost pressures. The drop in employment was sharp, and broadly in line with the average seen since March, IHS Markit said.

“Firms direly need a boost to cash flow, as many have been left struggling with low revenues and high cost burdens in June. Workers have been hard-hit, with employment dropping sharply for the fourth month in a row,” Owen added.




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