Dubai businesses ease up on discounting as costs climb

Katarina Premfors/Dubai Tourism

• Drop in selling prices weakest for 9 months
• Headline PMI 55.0, down from 55.7
• Companies go on hiring spree

Dubai’s appetite for discounting waned in August as more companies opted to pass on increased costs to customers, a survey of non-oil businesses has found.

The S&P Global Purchasing Managers’ Index (PMI) for August found that the impact of rising input costs on margins made companies “less inclined to offer discounts on their products and services”.

The report revealed only a slight drop in average selling prices in the emirate last month – the weakest since November 2022.

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Dubai has a long-established discounting culture, but business leaders such as Jen Blandos, founder of Female Fusion, a UAE-based community of female entrepreneurs, have warned against the practice when costs are climbing.

“In a world where costs are rising, providing discounts can be a challenge for many small businesses,” Blandos told AGBI.

“It’s time to leave the ‘race to the bottom’ in the past because, in fair pricing, quality thrives and that’s where everyone emerges a winner.”

The changing mood on discounting emerged despite the Dubai Summer Surprises shopping festival, which ran throughout August and offered consumers spend-and-win promotions and daily deals.

Dubai’s headline PMI figure stood at 55.0 in August, down from 55.7 in July.

It was the second monthly drop in a row and the lowest recorded figure since February. However, the index remains above the 50.0 mark that separates economic growth from contraction.

After accelerating to a 10-month high in June, the rate of improvement in business conditions softened further in August.

As a result, the increase in business activity was the least marked since January, exacerbated by a slowdown at wholesale and retail companies. 

Although construction activity continued to rise sharply, a drop-off in new work growth painted a weaker picture for the sector’s outlook.

David Owen, senior economist at S&P Global Market Intelligence, said: “While the expansion in business activity appears to have reached its peak, it is still running well above trend, boosted by strong new order inflows and robust economic conditions.”

Those new orders prompted businesses in Dubai to embark on a hiring spree: August had the joint-fastest rise in employment since November 2015.

Owen added: “The latest data on business sentiment and hiring adds to these positive findings, suggesting that companies feel there is still considerable scope for expansion in a growing market.”