Dubai business activity in April hit due to Covid-19

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Employment conditions worsened again in Dubai at the start of the second quarter.

Lockdown measures in Dubai dampened the spread of coronavirus disease 2019 (Covid-19) and had another drastic impact on business activity in April, said IHS Markit Dubai Purchasing Managers’ Index (PMI) report.

Output and new work fell at record rates, prompting a severe shedding of jobs as companies highlighted escalating fears about the long-term impact from the pandemic.

Efforts to lower costs meanwhile led to a modest, yet still record, fall in firms’ operating expenses, while output charges continued to decline.

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 and retail and construction.

The seasonally adjusted IHS Markit Dubai Purchasing Managers’ Index (PMI) posted a new survey record low of 41.7 in April, down from 45.5 in March, to indicate a severe deterioration in overall business conditions in the Dubai non-oil private sector.

Activity across the sector retreated at a sharp pace due to the Covid-19 crisis and government lockdown measures to curb the spread of the virus. The rate of decline was much quicker than the previous record set in March, with 38 per cent of surveyed businesses noting a fall in output during the month.

While firms often linked weaker activity to restricted movement and reduced opening hours, the loss of new business was also widely apparent in April. Sales declined at a steep rate, one that was the fastest seen in over ten years of data collection.

With countries in the region, and further afield, initiating similar public health measures, exports in the emirate also took a drastic hit.

The downturn from the virus pandemic was notably broad-based across Dubai’s non-oil private sector economy, with all key sectors recording stark decreases in activity and new work. That said, by far the sharpest reduction in activity was seen in the travel and tourism industry amid continued restrictions at home and abroad on international air travel. There was also a substantial decline in construction work as firms placed new building activity on hold during the lockdown period.

Employment conditions worsened again in Dubai at the start of the second quarter. Job shedding was only marginally quicker than in March, yet still the fastest seen in the survey’s history. Firms mentioned efforts to cut staff costs and operate with a minimal workforce during the lockdown, although they still managed to reduce outstanding work.

Meanwhile, lower purchases and reduced salaries helped to ease input costs in April for the first time since last November. This enabled a further drop in selling prices, as has been seen throughout the last two years.

Looking ahead to the next 12 months, businesses in Dubai mostly highlighted concerns about the duration of the Covid-19 pandemic. Reflecting this, the outlook for activity dropped to an historic low in April’s survey, with private sector companies signalling only a mildly positive forecast for output

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