Dubai: UAE's private sector continues to be weighed down by cashflow issues, which is forcing businesses to bring further cuts to their workforces. But the pace of job cuts has slowed down compared to the heavy numbers posted immediately after the pandemic spread and commercial activity went into lockdown mode.
This signals a "weak outlook for the economy", with whatever demand being created partly driven by discounts, according to the latest findings from IHS Markit, the agency that tracks economic activity and demand. In fact, discounts offered are at their highest levels since end of last year.
"Given the weak nature of the current rebound, any further measures could lead to a "double-dip" in business activity," says David Owen, Economist at IHS Markit. "Reflecting the weak outlook, business sentiment was at its second-lowest level on record, only just above August's historic low."
Businesses are not expecting any major turnaround in the medium-term. In fact, the sentiment is of "little optimism for future activity" based on September's feedback. But the "degree of confidence [has] improved from August's record low, but was still the second-weakest in the series history, as firms suggested the economic recovery would be subdued."
Thankfully, there is consumer demand
All through September, businesses reported marked improvements in consumer demand across categories. Some of it were brought on by the buying ahead of schools re-opening, as well as residents looking for some distractions after an extended period being stuck at home.
There were also gains from higher export sales - for only the second time in eight months. "Despite higher output and new business, firms have continued to lower job numbers in an effort to cut expenses and manage cashflow," said Owen.
Going over 50
Also last month, the UAE's purchasing managers' index (PMI) reading went past 50 for only the "third time since the introduction of coronavirus lockdown measures, strengthened by a faster increase in output levels and an additional rise in new work," the report states. It had risen from 49.4 in August to 51 and the highest reading for 11 months". But this reading is still below its "trend level" of 54.3.
Reflecting the weak outlook, business sentiment was at its second-lowest level on record [in September], only just above August's historic low