Dubai non-oil economic growth improves further in October as optimism soars

Sales growth hits a four-year high as PMI index climbs for a second consecutive month

The Dubai skyline. Business confidence in Dubai improved in October amid the emirate's continued economic momentum. Reuters

Business activity in Dubai's non-oil private sector economy improved further in October as business optimism soared and sales hit a four-year high amid the emirate's continued economic momentum.

Dubai’s seasonally adjusted S&P Global purchasing managers' index reading rose to 57.4 in October, from 56.1 in September, remaining well above the neutral 50-mark separating an expansion from a contraction.

The second consecutive improvement in the headline index underpins a sharp improvement in business conditions across the emirate’s non-oil economy.

Economic activity was driven by surging demand and growing confidence, as new business intakes increased at their sharpest pace since June 2019, with the upturn widely registered across key sectors.

“Demand momentum in the Dubai non-oil economy is on a steamroll in the latter part of the year,” said David Owen, senior economist at S&P Global Market Intelligence.

“The uplift was steered by accelerations in multiple sectors, adding further confidence that non-oil growth will be robust in the fourth quarter.”

Dubai's economy, which has been booming on the back of strong trade and tourism, grew by an annual 2.8 per cent to Dh111.3 billion ($30.3 billion) in the first quarter, according to official data released in August.

It is forecast to grow by 3.5 per cent in 2023, after expanding by 4.4 per cent last year, according to Emirates NBD.

The emirate's property market is booming, along with its retail, hospitality and travel and tourism sectors.

Dubai International Airport raised its full-year 2023 passenger forecast in August to 85 million, from an earlier projection of 83.6 million, and is inching towards its pre-coronavirus levels.

The emirate's hotels are also experiencing a “noticeable jump” in occupancy reservations as Dubai prepares to accommodate visitors for global events, including the Dubai Airshow and the UN's Cop28 climate summit, according to data by CoStar Group, the parent company of hotel analytics provider STR.

Dubai, the commercial, financial and trading centre of the Middle East, is pursuing its ambitious D33 road map that aims to catapult it into the world's top cities by economic strength by 2033.

The economic agenda includes 100 transformative projects with an aggregate economic target of Dh32 trillion, including the doubling of foreign trade to Dh25 trillion during the next decade.

The agenda also aims to boost the contribution of foreign direct investment to Dubai's economy to $177 billion over the next 10 years and add Dh100 billion to it annually through digital transformation.

Driving the headline PMI higher in October was a faster increase in new business volumes, as businesses surveyed reported new clients and an improvement in market demand.

The acceleration of sales growth was broadly spread across the monitored sectors and was particularly marked last month among wholesale and retail companies, as well as travel and tourism service providers.

Businesses surveyed said improvements on the demand side also supported the sharp rise in activity as the pace of output growth ticked up to a three-month high.

“Output at non-oil firms rose at a sharp pace accordingly in October, while forward-looking indicators suggest that the expansion could step up further in the months ahead,” Mr Owen said.

Business optimism and expectations for future activity growth in the emirate's non-oil private sector in October hit its highest since February 2020.

Amid optimism that new order inflows will continue to grow and drive activity expansion, companies also increased their inventories build-up.

The uplift was the quickest in about six years, according to the survey.

However, companies remained cautious on hiring, with survey data indicating only a slight rise in employment last month.