Dubai: The UAE’s purchasing managers' index (PMI) data for February showed a modest increase in non-oil private sector output with improved business expectations.
However, the underlying data indicated fresh disruptions to the UAE non-oil private sector in February, as rising coronavirus disease (COVID-19) cases led to increased restrictions in parts of the economy and hampered customer sales.
The headline index fell from 51.2 in January to 50.6 in February to indicate a slower and only marginal improvement in business conditions. The index stayed above the 50 neutral threshold largely due to the output sub-component, which continued to signal a rise in business activity in the UAE non-oil economy.
New business failed to rise for the first time in four months, contributing to just a modest rise in output and a broadly unchanged employment level.
"The tightening of COVID-19 restrictions in February had a notable impact on the UAE economy, according to PMI survey data. New orders failed to grow for the first time since last October, while output growth softened since the start of the year,” said David Owen, Economist at IHS Markit.
Improved expectations
Business expectations improved, but only gradually as restrictions led to further uncertainty about short-term growth prospects despite hopes for a rebound in the latter half of 2021.
Firms also signalled that global supply chain delays impacted on the UAE economy in February, as lead times on inputs lengthened at the fastest rate since last April. However, the impact on costs has so far been limited, allowing companies to continue offering discounts on sales.
Stable employment
Employment numbers were largely stable in February, as unchanged sales volumes meant that companies saw little pressure on capacity and were able to lower backlogs for the sixth month running. Subdued jobs trends were also linked to expectations for output in the next 12 months which, despite improving to a five-month high, remained historically weak.
Many firms said that new restrictions made the near-term outlook more uncertain, although the rapid rollout of COVID-19 vaccines and projected new business gains from the Expo 2020 meant that firms were generally optimistic of an improvement in the economy later in the year.
