RIYADH: Dubai’s Purchasing Managers’ index increased to 55.7 in May from the previous month’s 54.7, as travel and tourism displayed the sharpest expansion, according to S&P Global.
This upturn was the second fastest in nearly three years, and indicates a robust improvement in Dubai’s non-oil private sector.
Improvement in client demand after markets started recovering from the impact of the COVID-19 pandemic was the main driver of the strong growth in the non-oil economy in Dubai.
However, there was a considerable disparity in sales performance by sector, according to S&P Global.
While travel and tourism recorded the sharpest expansion in May due to the ease of travel restrictions and further rise in bookings, wholesale and retail firms saw a sharp slowdown in new order growth, according to S&P Global.
Construction, new work inflows also declined for the first time since September 2021, the press release added.
David Owen, an economist at S&P Global said: “A fast-recovering tourism sector is now masking weak performances in the rest of the economy.”
The slowdown in those two businesses was attributed to the rising inflationary pressures that caused a sharp increase in input costs and fuel prices in May. According to S&P Global, the pace of inflation in the non-oil economy quickened to the fastest pace in just over four years.
Businesses could not pass on these rising prices to customers despite efforts, as strong competitive pressures continued to drive prices lower.
While only marginal, the pace of job creation was the fastest in 2022 so far, as firms expanded their workforce numbers to support growing output levels.
Looking ahead, fears that inflationary costs will outweigh sales growth has affected levels of optimism that slipped to the weakest since May 2021.
“The uplift in input costs also placed further pressure on firms’ margins, amid additional reports of charge discounting. This contributed to a more subdued outlook for future activity, which slipped to the lowest in one year,” Owen added.
