Dubai: The UAE economy posted rapid growth in the non-oil private sector economic activity in December according to the latest Purchasing Managers’ Index (PMI) data.
The PMI data published by IHS Markit showed growth running at a marked pace throughout the fourth quarter amid the start of the Expo 2020 and an easing of travel restrictions.
“The PMI remained close to its recent peak, at 55.6 in December, showing that the benefits to the economy from the Expo 2020 and the loosening of COVID-19 measures had remained strong throughout the final quarter of the year,” said David Owen, Economist at IHS Markit .
The latest survey indicated a further sharp expansion in new business, whilst output levels rose at the fastest pace in nearly two-and-a-half years.
On the downside, businesses also reported a much stronger rise in cost pressures that was often linked to increased energy and fuel prices. Overall purchasing costs rose at the sharpest rate since March, which often dissuaded firms from purchasing extra inputs.
Demand and jobs
New orders continued to rise sharply in December, despite the rate of growth easing to a three-month low. Increased travel, often due to the Expo 2020, and strong demand from clients were again cited as key drivers of sales growth. New export orders also expanded, although the upturn slowed and was only marginal.
Data showed higher new orders continued to support a marked expansion in non-oil private sector activity in December. In fact, the upturn was the most marked since July 2019, with around a quarter of respondents seeing an increase in output from November.
Despite this, firms continued to struggle to keep up with demand, leading to a sixth successive monthly increase in backlogs. Workforce numbers also rose, albeit marginally, reflecting a further recovery in employment after a long period of decline.
While businesses continued to enjoy strong demand levels, they also reported a much sharper increase in input prices. The uptick was largely attributed to a rise in fuel and energy costs, as well as higher raw material prices.
In contrast to higher input costs, output charges fell for the fifth month in a row in December. Discounts were largely offered in response to strong competition.
Looking ahead, business confidence regarding future activity due to the Omicron wave of the pandemic.
“The next few months may prove more challenging, however, depending on how the Omicron variant impacts worldwide travel and local restrictions.
Businesses also face the prospect of higher inflation, after the latest data indicated the fastest rise in purchase costs for nine months due to an increase in energy and raw material prices,” said Owen.