Rapid Sales Growth Enhances Business Confidence in Dubai

11 Oct, 2023

Rapid Sales Growth Enhances Business Confidence in Dubai

Dubai's non-oil sector has witnessed a substantial upturn in its business activities, driven by a remarkable surge in new business acquisitions, marking the sharpest increase in over four years. This surge in confidence was revealed by the latest Purchasing Managers Index (PMI) survey data released, which indicates that Dubai's non-oil sector is on a path of significant growth.

The private sector economy in Dubai has experienced its first acceleration in growth in three months, primarily attributed to a substantial rise in sales, which has, in turn, significantly bolstered business confidence to its highest level since March 2020, as reported by S&P Global Purchasing Managers Index data.

However, amidst this impressive growth, employment expansion has slowed to its softest rate since February, and inventory growth has decelerated. These slowdowns can be attributed to an increase in overall input costs, which have also impacted the willingness to offer sales discounts, as highlighted in the PMI report.

In September, the headline PMI surged to 56.1, up from 55.0 in August, indicating robust improvements in Dubai's non-oil operating conditions and marking the strongest performance in three months. The key driver behind this increase was a substantial rise in new orders, a promising sign for the non-oil private sector economy. The survey extends to various sectors, including travel and tourism, wholesale and retail, and construction.

David Owen, senior economist at S&P Global Market Intelligence, noted that Dubai's non-oil companies reported a rapid acceleration in sales growth in September, reaching the highest level in over four years. This growth was fueled by the acquisition of new clients and an overall improvement in economic conditions.

The PMI survey data also revealed that non-oil companies had increased their workforce over the month, although the rate of job creation was mild and the slowest since February. Inventory accumulation slowed from the previous month and remained modest.

Despite the challenges, business confidence regarding future activities has continued to rise, reaching levels not seen since the start of the COVID-19 pandemic. This indicates that firms in Dubai have improved their expectations for near-term growth.

Rising input prices have resulted in increased overall business expenses, limiting the rate of price discounting, with only a fractional decrease in output charges. Furthermore, the pressure from rising costs has also impacted hiring and inventory growth, potentially leading to capacity constraints if demand continues to rise.

Panellists participating in the survey noted that the pace of expansion accelerated to its highest level since June 2019, driven by improving demand conditions, intensified sales efforts, and the ability to offer more services to clients. Additional sector data indicated faster growth in travel and tourism, wholesale and retail, and construction.

Wholesale and retail, in particular, experienced a rapid acceleration in sales, underscoring a substantial increase in business activity in September. Although growth remained slightly slower than mid-year levels, the report noted that companies were hopeful that strengthening demand conditions would continue to support future demand and activity. This optimism was notably high in the construction and wholesale and retail sectors.

In summary, Dubai's non-oil sector is experiencing a rapid expansion, with surging business confidence and increased demand across various industries, driven by an array of factors that are contributing to the region's economic growth.