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Non-oil private sector companies in Dubai recorded further improvement in operating conditions in May 2023, and growth maintained its strength despite a slight decline compared to April.
Production and employment increased by stronger degrees, while demand momentum eased and supply chain pressures eased further. At the same time, companies showed stronger confidence in the next 12 months, recording their best production forecast in more than three years.
The Purchasing Managers Index (PMI) reading of S&P Global to monitor the movement of the economy in Dubai recorded 55.3 points in May, which indicates a sharp improvement in general in business conditions during the month, after the main index reached its highest level in May. Eight months, recording 56.4 points in April.
Strongest activity growth since August 2022
A significant increase in the number of jobs
Growth accelerated to its highest rate since January 2018
Among the factors that affected the index was a slight increase in new business flows and a further reduction in delivery times.
On the other hand, companies witnessed a marked and faster expansion in activity levels in the month of May. The growth rate accelerated for the fifth month in a row and was the strongest since August 2022. The majority of companies surveyed linked the increase in activity to another sharp rise in new business, supported by ongoing marketing efforts and work on ongoing projects.
increase production
Production increased sharply in each of the three sectors studied, supported by additional increases in customer demand. In addition to the rapid expansion of activity, companies were confident that growth would continue over the next year. Companies participating in the study reported the highest degree of optimism since March 2020, before the first global lockdown due to COVID-19.
The latest survey data also indicated an improvement in supply chain conditions across the non-oil economy in May. This allowed suppliers to increase their capacity and meet delivery requirements. As a result, average delivery times were reduced at a rapid pace, most notably since August 2019. The improvement helped lead to another round of inventory expansion in May, although the recent inventory expansion was less than that recorded in both March and April mostly. The companies surveyed stated that the increase in new purchase orders meant that they needed to replenish their stocks as part of preparations for future projects.
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Weak inflation
Weak inflation helped increase purchasing efforts somewhat, as input prices rose only marginally. The slow rise in costs encouraged companies to offer additional discounts on their sales prices. Output prices continued to fall relatively sharply in May after declining at the fastest rate in three and a half years in April. Finally, strong growth and improved expectations led to a remarkably strong performance in the labor market during the month of May. Employee numbers rose for the 13th consecutive month, and the pace of job creation was the fastest since the start of 2018. Anecdotal evidence showed that companies primarily sought to hire sales and marketing workers in order to take full advantage of improved new business.
Reducing supply pressures
David Owen, economist at S&P Global Market Research, said: “Dubai’s non-oil economy continued to improve at a strong pace in May. The main index fell to a three-month low of 55.3, but this was partly due to an easing of supply pressures, as improving global conditions helped average lead times fall at the fastest pace since mid-2019. Likewise, while new business growth slowed from a low April, which was the highest in eight months, however, remained sharp overall. Significantly, companies witnessed a further acceleration in the rate of activity growth, which rebounded for the fifth consecutive month in May. As companies sought to expand their output, job numbers also rose more, and growth accelerated to its highest rate since January 2018. At the same time, business expectations for the coming year improved sharply in May, as businesses grew more confident that favorable economic conditions would support new business. Perhaps one of the indicators that the region is getting rid of the effects of the epidemic era is the degree of confidence of companies in future conditions, as it was the strongest since March 2020, that is, just before the first global closure.
