Abu Dhabi skyline
The February PMI numbers for the UAE were in robust territory, according to IHS Markit. Image Credit: Shutterstock

Dubai: Business conditions in the UAE recorded a ‘marked improvement’ during February, with the private sector recording gains in demand. There was also increased optimism about future sales as UAE entities oversaw the challenges posed by the Omicron virus.

The upsurge was widely linked to rising client demand, with businesses also pointing to growth in tourism as the Expo 2020 continued and countries loosened their travel measures,” said David Owen, Economist at IHS Markit, the consultancy that tracks monthly PMI (Purchasing Managers Index) numbers as a gauge for private sector activity in a country

The sentiments were largely drawn before the onset of the Russia-Ukraine conflict on February 24. Even otherwise, UAE business say that global shipment delays are proving a bother as are rising material prices.

"Local vendors were able to deliver available inputs more quickly, and there are signs that supply problems are slowly easing as the world emerges from COVID-19 restrictions," said Owen. "This should aid businesses in relation to both capacity and cost pressures in the coming months."

The year-ahead outlook for business activity rose to a four-month high, and was the second-highest since the middle of 2020. (Again, these readings were taken before the Russia-Ukraine outbreak.)

Hiring activity

When it comes to job creation, businesses ran into issues. They “struggled to take on additional workers during February, as latest data signalled a broadly unchanged level of employment,” the report states. “This, as well as some ongoing reports of global shipment delays related to the pandemic, meant that firms saw a rise in backlogs of work for the eighth month running.”

Lower and fewer discounts
UAE businesses are dropping the heavy discounts they had been providing to get goods moving. In fact, the "pace of discounting was the slowest since August 2021," IHS Markit reports.

Higher costs

The steady rise in raw material prices and transport costs are starting to burden input costs for businesses, “although the rate of inflation ticked down to the weakest since last November”. Going forward, these entities will have to factor in the surge in oil prices, now just a dollar or two away from hitting $120 a barrel.

First PMI gain in 3 months
The PMI reading for February was at 54.8 compared with 54.1 the month before. It marked the first rise in the measurement in three months.

UAE’s “vendors were able to speed up their deliveries, in a sign that local supply chain improvements had helped firms to offset pandemic-related issues,” the IHS Markit report adds.