Find anything about our articles and more.
Enter a query in the search input above, and results will be displayed as you type.
Try typing "Dubai Economics", "Dubai GDP", "GCC Macro"
Khatija Haque - Head of Research & Chief Economist
Published Date: 09 June 2020
Business conditions in Dubai’s non-oil private sector deteriorated for the third consecutive month in May, although the rate of decline was less severe than in March and April. The headline index rose to 46.0 from 41.7 in April. Output and new work declined at a slower rate last month as lockdown measures were partially lifted. Employment continued to fall, with 6.5% of firms surveyed reporting reduced headcount last month. This was the smallest percentage of firms reporting job losses since February. Suppliers’ delivery times lengthened again in May, as shipments continued to face delays. This may have contributed to the further drawdown in inventories in May. Input costs were fractionally higher last month but selling prices were slightly lower on average. Expectations about future output improved slightly from April, but the overall level of optimism remained low compared to the historical average.
Source: IHS Markit, Emirates NBD Research
Travel & tourism continued to be the worst performer of the three key sectors surveyed last month. However, the travel & tourism index recovered to 43.7 in May as both output and new work declined at a much slower rate last month. Employment in the sector fell again in May as businesses sought to cut costs in the face of continued weak demand. Both input costs and selling prices in the sector declined last month. Businesses remained pessimistic on average for the second consecutive month, citing expectations that global travel restrictions will remain in place “for some time”. Almost 20% of panellists in the sector expected their output to be lower in a year’s time, while only 12% anticipated an increase in activity.
Source: IHS Markit, Emirates NBD Research
The construction sector also saw business conditions deteriorate further in May, albeit at a slower rate than in April. New work contracted sharply again in May as clients were reluctant to commit to new projects during the coronavirus pandemic. Output declined at a slower rate than in April, while firms in the sector reduced staff numbers for the third consecutive month. The lower staff costs likely contributed to the slight decline in input costs, which was passed on in the form of lower prices charged. Suppliers’ delivery times increased again in May due to continued supply chain disruptions, providing a (somewhat misleading) boost to the construction sector index.
The wholesale and retail sector index rose in May to 47.4 but remained in contraction territory for the second month in a row. New work contracted at a steep rate, although not as severely as in April, with the lifting of some lockdown measures helping to mitigate some of the decline. Business activity also benefitted from non-essential retail businesses being allowed to reopen and reduced curfew hours. There were more jobs lost in the sector in May, with the employment index for wholesale and retail trade below the neutral 50-level for 6 of the last 7 months. Input costs increased at the fastest rate since September 2019, despite lower staff costs, and some firms passed this on through higher selling prices. However, the rise in selling prices last month was slight. Suppliers’ delivery times increased in May, although not to the same extent as in April. Business expectations improved in May with 24% of firms expecting their output to be higher in a year’s time, against 12% of firms expecting output to be lower.
Source: IHS Markit, Emirates NBD Research
Overall, the May PMI data indicate a contraction in Dubai’s private sector in Q2, although the indices appear to have bottomed. While restrictions on business and consumer activity have been eased further from 27 May, we expect consumer demand to remain relatively soft in the near term in the context of salary cuts and job losses. The external environment is also improving only gradually, but provided it does continue to improve, it is reasonable to expect the PMIs to return to expansion territory in Q3 2020.
Regional growth to be driven by improving global backdrop
13.01.2021
RBI will remain on hold in February
17.01.2021
Terms and Conditions
Copyright © 2021 Emirates NBD Bank PJSC. All Rights Reserved