An upswing in travel, tourism, wholesale and retail sectors helped send Dubai’s non-oil business to an eight-month high in April as activity levels gained further momentum.
“A surge in sales momentum in the travel and tourism and wholesale and retail sectors helped send the Dubai PMI to an eight-month high, signalling a robust improvement in the health of the non-oil economy,” said David Owen, senior economist at S&P Global Market Intelligence.
In the first quarter of 2023, Dubai welcomed 4.67 million international overnight visitors compared to 3.97 million tourists during the same period in 2022. According to Dubai’s Department of Economy and Tourism (DET), the numbers mark the city’s best quarter-one performance since the pandemic. Dubai recorded 14.36 million international visitors in 2022, closer to the 16.73 million tourists in 2019, according to DET statistics. Dubai Airports forecasts the number of passengers that will pass through Dubai International Airport by the end of this year will reach 78 million, up from 66.1 million last year.
Dubai’s hospitability sector has rebounded strongly. Hotel occupancy rates in January and February rose to 84.4 per cent, up from the 78 per cent recorded in the first two months of 2022 and 84 per cent in 2019.
Emirates NBD said in a recent report that the strong start for the year shows promising signs that Dubai’s tourism, an important pillar of the emirate’s economy, may surpass the record number of visitors of 16.7 million in 2019.
The report said new clients, lower prices, and increased market activity served to drive sales volumes higher, according to anecdotal evidence. Of the three monitored sectors, the improvement in sales growth was chiefly led by travel and tourism and wholesale and retail, where upturns reached the sharpest recorded for eight and six months, respectively.
New orders continued to rise at the second-quickest rate in nearly four years amid a sharpest drop in selling prices since October 2019 as inventories rose markedly, the latest purchasing manager index survey shows. The headline S&P Global Dubai PMI rose again in April, up to an eight-month high of 56.4 from 55.5 in March. The index signalled a robust improvement in business conditions across the non-oil economy and one that was sharper than the series trend.
Owen said the overall upturn meant that business conditions grew at one of the fastest rates since mid-2019, as new business intakes increased to a much sharper degree than in March, and activity levels rose more quickly.
“Also supporting growth were sustained efforts by firms to build inventories in the light of a promising demand outlook, as well as recruiting staff to support higher workloads. Firms have been helped by a subdued cost environment, although survey data suggests that savings are being directly passed to customers in the form of lower charges — in fact, prices charged fell at the quickest rate in three-and-a-half years in April. While this supported sales pipelines for businesses facing a competitive market environment, it comes at the risk of further suppressing margins,” said Owen.
The PMI report noted that momentum in the construction industry waned as new work rose only modestly and to the least extent since last November. “The build-up of sales growth contributed to a slightly stronger increase in non-oil activity at the start of the second quarter. Quickening for the fourth successive month, the rate of expansion was the fastest since September 2022 and well above the survey trend. There were also signs of a sustained improvement in supply chains,” said the report.
Companies also sought to add workers in April in line with higher output requirements. The rate of job creation slowed from March’s over-five-year high but was still elevated. At the same time, firms enjoyed a more settled cost environment, as average prices paid for inputs were broadly unchanged from the previous survey period. A slight rise in costs in the construction sector was mostly offset by reductions in wholesale & retail and travel & tourism.