Stock Abu Dhabi skyline
After a few months of improved orders and activity, private businesses felt the pinch in November. Image Credit: Gulf News Archive

Dubai: The UAE’s private sector activity went into contraction during November – and the first time it has happened since May, according to the monthly tracker put out by IHS Markit. A second wave of lockdowns in key export markets was the primary cause for the downbeat mood.

But there is one detail among the data that should come as relief – job losses are now falling at their lowest rate since February, which was the month before the pandemic broke out here. Businesses surveyed also confirmed they are taking back some of the workforce laid off earlier.

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Unsure conditions

But the wider sentiments among businesses is running negative. They gave a "negative outlook for the year ahead for the first time since sentiment data were first collected in April 2012," said David Owen, Economist at IHS Markit. "Firms were hindered by a renewed fall in exports as global markets suffered from rising COVID-19 cases and lockdowns in some regions, including Europe."

In fact, new orders from overseas clients decreased "slightly" in November, after rising in the prior two months.

Sales trends did pick up [in November], but only enough to reverse a fall in business volumes seen in October.

- David Owen of IHS Markit

Below 50

The Purchasing Managers' Index (PMI) for November remains at 49.5, and "registering below the 50.0 threshold for the third time in four months".

"The index remained in contraction territory largely due to the output sub-component, which registered below 50.0 for the first time since May," the report notes. "Firms highlighted that the recovery in activity after the COVID-19 lockdown had stalled as demand conditions remained subdued."

This is what seems to have spoilt sentiments regarding 2021 prospects. Businesses will be hoping they get enough of a lift in December to alleviate their worries.

Costs too are down
Purchase prices of raw materials and other needs fell for the first time since April, alongside a further drop in staff costs, according to IHS Markit. "This supported another reduction in output charges, although the rate of discounting was only modest."