Global supply chain issues hamper Dubai’s business activity

Photographer: Christopher Pike / Bloomberg

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Business conditions in Dubai improved at a slower pace last month after global supply chain constraints delayed the recovery of the Middle East business hub from the pandemic.

The Dubai Purchasing Managers Index, compiled by IHS Markit, rose only slightly for 51 in March compared to 50.9 the previous month, remaining above the level of 50 that separates growth from contraction.

A rise in prices fueled by raw material shortages has led to the fastest acceleration in input cost inflation since late 2018. Yet companies have lowered selling expenses at the fastest pace in five months to stimulate demand. This translated into a downsizing for the first time this year, although the decline in employment was minimal.

“Global supply difficulties washed up on the shores of Dubai in March,” wrote David Owen, economist at IHS Markit, on Sunday. “This will limit profit margins, as competitive pressures and efforts to encourage recovery in demand have led companies to reduce production costs.”

Non-oil private sector activity in the city began to recover from the pandemic late last year and has remained in growth territory since then.

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More from IHS Markit:

• Production continued to grow steadily, as new work resumed after a slight decline in February.
• Businesses remained confident of an increase in business activity over the coming year as the economy recovers from the pandemic.
• Construction companies saw the second largest increase in output since mid-2019, with some projects resuming following virus restrictions.
• The travel and tourism sector saw a rise in its title, but activity remained subdued due to global travel restrictions.
• The outlook for future activity for non-oil companies remained positive in March, although it declined from the five-month high in February.

(Updates with the context of the third paragraph)