(Bloomberg) — Dubai is closer to emerging from a prolonged bout of deflation even as business conditions turn worse.
Prices were “broadly unchanged” in August after output charges declined in each of the past 15 months, according to IHS Markit. At the same time, its Dubai Purchasing Managers’ Index dropped to its lowest level in more than three years, approaching the threshold of 50 that separates growth from contraction.
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“Future output expectations dimmed but remained relatively strong,” David Owen, economist at IHS Markit, said in a report on Monday. “Selling prices were close to stabilization during August.”
The United Arab Emirates is among the nations in the Gulf that have been mired in deflation. A slump in housing costs has been a major drag on prices, compounding the statistical effect of last year’s introduction of value-added tax in Saudi Arabia and the U.A.E.
In Dubai, “intense competition for new work” was another key factor that contributed to the deflationary momentum, according to IHS Markit.
The overall gauge, a measure of business conditions in the emirate’s non-oil private sector, dropped for a third month to 51.7 in August. “The slowdown was mostly reflected in the wholesale and retail and construction sectors,” IHS Markit said.
