Dubai's non-oil economy continues to improve with easing of restrictions

Burj Khalifa. Dubai's non-oil private sector economy continued to improve in August. Bloomberg

Dubai’s non-oil private sector economy further improved in August as businesses continued to recover with the easing of coronavirus-related restrictions.

However, the increase in output was the softest in three months as the pace of demand growth slowed.

The seasonally adjusted IHS Markit Purchasing Managers' Index reading was above the neutral 50 mark for a second month running.

August's reading of 50.9, which slipped from 51.7 in July, signalled a marginal improvement in business conditions.

“Business activity rose solidly, but the expansion was markedly weaker than in July,” said David Owen, an economist at IHS Markit.

“[Companies] have not seen a full-scale uplift in demand to pre-pandemic levels.”

New work increased solidly in August, with the rate of growth only slightly weaker than July’s eight-month high.

However, this was the first time since April that the output index reading had weakened.

Despite an increase in sales, customer demand remained subdued in general, according to the companies surveyed.

“Where [companies] raised output, this was largely attributed to higher demand and an improved market situation [after] the easing of lockdown measures,” the survey said.

Like other countries, Dubai introduced various measures in April to contain the spread of the coronavirus pandemic.

Most restrictions have since been removed and the emirate is now open to international tourists.

Authorities also introduced several measures to help businesses recover from the virus-induced slowdown.

The Dubai government announced an economic stimulus package worth Dh1.5 billion in July, bringing the total support given to businesses to Dh6.3bn.

While output and new orders increased in August, the growth of the construction, wholesale and retail sectors in the emirate softened.

The travel and tourism sector registered a dip in business conditions, but that remained modest overall and the speed of decline was unchanged from July, according to the survey.

Job cuts gathered pace as companies continued to reduce capacity and employee costs.

The fall in workforce numbers was broadly in line with the average over the six-month sequence of decline, the survey said.

“Demand weakness drove a further cut to jobs in August ... broadly level with the trend over this [coronavirus]-affected period,” Mr Owen said.

Business optimism also weakened last month with some companies expecting activity to improve.

However, others cited the pandemic's “unpredictability” as an impediment to recovery.