Dubai's non-oil private sector economy expands at softer rate in January

Firms remain optimistic about 12-month outlook of business in the emirate

Dubai's non-oil private sector economy expanded in January. Pawan Singh / The National

The non-oil private sector economy of Dubai expanded in January, albeit at a slower rate, helped by a modest rise in output.

The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index fell to 50.6 in January from 52.4 a month before. A reading above 50 indicates economic expansion and a reading below points to a contraction. The January results is the weakest improvement in the health of the non-oil private sector since February 2016, according to the survey.

Growth primarily eased due to a weaker expansion in business activity and a subsequent drop in job numbers. At the sub-sector level, the travel and tourism industry saw a modest improvement in January. However, the weakness of the construction, wholesale and retail sectors pushed the headline index lower.

Output expanded modestly at the start of the year, but the rate of growth slowed to the weakest in almost four years. New orders followed a similar trend to output, with the latest data indicating the weakest increase in demand in 47 months.

Companies surveyed attributed the softer expansion to slow market conditions, amid a weaker global economy.

"Growth momentum in Dubai's non-oil private sector softened for the third month in a row in January," said David Owen, an economist at IHS Markit. "Employment in Dubai was notably affected ... efforts to improve sales through lower output prices continued."

Weaker demand growth affected hiring activity in January, with employment falling for the first time since last August. Staff numbers were reduced in bid to control costs. The rate of job losses, however, was marginal, according to the survey.

Average prices set by non-oil private sector firms declined further at the start of 2020. However, the drop in prices was the softest for four months.

“Despite some companies raising salaries, the overall increase in cost burdens was marginal in January,” according to the survey. “In particular, firms noted little pressure on purchase prices due to soft market demand.”

Although business expectations slipped in January on the back of softer activity growth, firms surveyed were optimistic about prospects of business in the coming 12 months. They expect the launch of new projects and the market to stabilise in the year ahead.