S&P Global Dubai PMI hits 35-month high
Growth in Dubai non-oil business conditions strengthened to the greatest degree in nearly three years in May, according to the latest Purchasing Managers' Index (PMI) survey from S&P Global. The robust expansion was aided by a marked improvement in the travel & tourism sector, as businesses saw a further recovery in sales.
The seasonally adjusted S&P Global Dubai PMI picked up to 55.7 in May, up from 54.7 in April, and indicating a robust improvement in the health of the non-oil private sector. In fact, the latest reading was the highest since June 2019.
Strong new business growth remained a prominent feature of the non-oil economy during May, as survey panellists often noted an improvement in client demand as markets recovered from the pandemic. Notably, the upturn accelerated from April and was the second-fastest in nearly three years.
At the same time, however, cost pressures quickened across the non-oil economy, driven by ongoing volatility in global energy markets. This added to greater uncertainty surrounding future growth, with overall confidence fading to a one-year low.
However, there was a considerable disparity in sales performance by sector. Of the three monitored categories, travel & tourism displayed by far the sharpest expansion in May, as businesses commented on further rises in bookings due to the easing of travel rules. By contrast, wholesale & retail firms saw a sharp slowdown in new order growth, while in construction, new work inflows declined for the first time since September 2021.
Weakness in these two sectors came amid a sharp increase in input costs in May. The pace of inflation in the non-oil economy quickened to the fastest in just over four years, as firms particularly noted the impact of rising fuel prices due to the war in Ukraine. Other items such as steel, aluminium, chemicals and timber were also cited as up in price.
While firms attempted to pass these costs onto customers, overall output charges decreased for the eleventh straight month in May. According to panellists, strong competitive pressures continued to drive selling prices lower, though the overall reduction was only modest.
Meanwhile, survey data indicated a further marked increase in non-oil business activity during May. Companies signalled that rising new order volumes and ongoing project work were behind the expansion, which was the second-fastest in nearly three years.
Supporting the rise in output, firms expanded their workforce numbers during the month, following a slight reduction in April. While only marginal, the pace of job creation was the fastest in 2022 so far. Businesses were also helped by an improvement in suppliers' delivery times, albeit one that was the slowest since February.
Looking ahead, businesses were notably less confident of a rise in activity over the coming year in May, as inflation fears weighed on expectations of sales growth. In fact, the degree of optimism slipped to the weakest since May 2021.