Monday 1 June 2020

New business drops sharply in Dubai amid pandemic

DUBAI, April 9, 2020

Business  conditions  in  Dubai  deteriorated  at  a  sharp  pace  in  March  as  the  global  economy  was  shaken  by  the  coronavirus  disease 2019 (Covid-19) pandemic, said IHS Markit, a global provider of analytics and critical information.

New work plummeted, with the  travel  &  tourism  industry  particularly  faring  badly,  whilst  consumer  demand  for  non-food  items  fell  at  a  marked  rate.  Firms  reacted  with  a  steep  drop  in  employment  and  the  first reduction  in  output  for  over  four  years.

Business  expectations  meanwhile dropped to a 43-month low. The  headline  IHS  Markit  Dubai  Purchasing  Managers'  Index  (PMI® is derived from individual diffusion indices which measure changes in output, new orders, employment, suppliers’ delivery times  and  stocks  of  purchased  goods.

The  survey  covers  the  Dubai  non-oil  private  sector  economy,  with  additional  sector  data  published  for  travel  &  tourism,  wholesale  &  retail  and  construction.

The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index (PMI) fell below the 50.0 mark separating growth from contraction  in  March,  to  the  lowest  reading  recorded  in  the  decade-long  series.

Posting  45.5,  down  from  50.1  in  February,  the figure indicated a sharp deterioration in business conditions in the Dubai non-oil economy. Weaker  business  conditions  were  driven  by  a  substantial  fall  in  new  orders  received  by  Dubai  firms  in  March  compared  to the  previous  month.  Firms  overwhelmingly  linked  this  to  the  Covid-19  pandemic  that  has  led  to  government  measures  to  dissuade travel and consumer activity.

Spending thus declined sharply,  with  travel  &  tourism  companies  noting  a  large  drop  in  demand.  Construction  firms  also  reported  a  decrease  in new  work.  By  contrast,  wholesale  &  retail  providers  registered stronger growth in sales due to bulk-buying of food items.

Dubai firms responded to the overall sharp fall in new business with  a  large  reduction  in  workforces  during  March. The  rate  of  decline was the quickest since the series began in January 2010. Businesses  often  reported  freezing  hiring  activity  and  asking employees to take leave in order to reduce staffing costs.

At the same time, business activity dropped for the first time since February  2016, though  the  decrease  was  only  moderate  overall. Firms also noted a second successive month of inventory depletion,  with  the  latest  round  of  reduction  the  largest  since  October 2010.Efforts to limit cost pressures in March meant that overall input price inflation remained soft, supported by a slight easing of staff expenses.

Some  firms  mentioned  higher  raw  material  prices, though a drop in oil prices helped to offset the increase. This enabled  companies  to  extend  discounting  of  output  charges,  but the latest reduction was the weakest for six months.

Lastly, the outlook for future activity in the Dubai non-oil private sector  was  notably  weaker  during  March  due  to  uncertainty  from  the  viral  pandemic.  Firms  were  still  hopeful  of  an  uplift in  output  in  the  next  12  months  overall,  although  the  level  of  optimism was the lowest seen since August 2016. – TradeArabia News Service


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