New business drops sharply in Dubai amid pandemic
Business conditions in Dubai deteriorated at a sharp pace in March as the global economy was shaken by the coronavirus disease 2019 (Covid-19) pandemic, said IHS Markit, a global provider of analytics and critical information.
New work plummeted, with the travel & tourism industry particularly faring badly, whilst consumer demand for non-food items fell at a marked rate. Firms reacted with a steep drop in employment and the first reduction in output for over four years.
Business expectations meanwhile dropped to a 43-month low. The headline IHS Markit Dubai Purchasing Managers' Index (PMI® is derived from individual diffusion indices which measure changes in output, new orders, employment, suppliers’ delivery times and stocks of purchased goods.
The survey covers the Dubai non-oil private sector economy, with additional sector data published for travel & tourism, wholesale & retail and construction.
The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index (PMI) fell below the 50.0 mark separating growth from contraction in March, to the lowest reading recorded in the decade-long series.
Posting 45.5, down from 50.1 in February, the figure indicated a sharp deterioration in business conditions in the Dubai non-oil economy. Weaker business conditions were driven by a substantial fall in new orders received by Dubai firms in March compared to the previous month. Firms overwhelmingly linked this to the Covid-19 pandemic that has led to government measures to dissuade travel and consumer activity.
Spending thus declined sharply, with travel & tourism companies noting a large drop in demand. Construction firms also reported a decrease in new work. By contrast, wholesale & retail providers registered stronger growth in sales due to bulk-buying of food items.
Dubai firms responded to the overall sharp fall in new business with a large reduction in workforces during March. The rate of decline was the quickest since the series began in January 2010. Businesses often reported freezing hiring activity and asking employees to take leave in order to reduce staffing costs.
At the same time, business activity dropped for the first time since February 2016, though the decrease was only moderate overall. Firms also noted a second successive month of inventory depletion, with the latest round of reduction the largest since October 2010.Efforts to limit cost pressures in March meant that overall input price inflation remained soft, supported by a slight easing of staff expenses.
Some firms mentioned higher raw material prices, though a drop in oil prices helped to offset the increase. This enabled companies to extend discounting of output charges, but the latest reduction was the weakest for six months.
Lastly, the outlook for future activity in the Dubai non-oil private sector was notably weaker during March due to uncertainty from the viral pandemic. Firms were still hopeful of an uplift in output in the next 12 months overall, although the level of optimism was the lowest seen since August 2016. – TradeArabia News Service
Source: http://tradearabia.com/news/BANK_366445.html