UAE’s non-oil private sector signals mild growth in January: PMI

Business activity in the non-oil private sector in the UAE continued to improve in the first month of 2021, as growth in output and new orders supported a continued recovery from a COVID-19 driven slowdown.

The IHS Markit UAE Purchasing Managers’ Index (PMI) recorded 51.2 for the second month running in January. Whilst being the joint-highest reading since August 2019, the index showed only a marginal improvement in business conditions since the end of last year. The index also remained well below its average of 54.2. The expectations for future activity continued to be weak, despite improving to the highest for three months.

“The UAE non-oil private sector continued to record soft growth in the new year, with the PMI unchanged at 51.2 from December. Compared to the results seen throughout 2020, the latest data indicated more favorable business conditions. However, with firms still having to make up lost ground from the COVID-19 lockdown, the pace of recovery so far appears subdued.”

Business activity in the non-oil economy posted solid growth during the month, which the survey links to the surge in client sales and recovery of construction projects. The rate of output growth eased slightly from December’s five-month high but remained one of the quickest seen since the decline from the COVID-19.

As per the latest survey, the number of new business received by UAE companies also increased, due to higher export sales on rising orders from the Gulf region. The pace at which total sales surged was only modest and lower than that of December, leading some firms to concentrate work on fulfilling outstanding orders.

The mild increase in sales also tampered with firms’ expectations for future activity. Despite the quick roll-out of COVID-19 vaccines, business expectations picked up only slightly from December and were the third-weakest in the series history (since April 2012). Some firms noted that the recent uptick in COVID-19 cases could lead to tighter restrictions on businesses and a fall in output in the short-term.

“The rapid roll-out of COVID-19 vaccines in the UAE should help to restore confidence in markets over the first half of 2021, although firms were still relatively downbeat about future growth in January. Higher case numbers provided concerns of tighter restrictions in the short-term, which could present further challenges for businesses,” Owen said.

Meanwhile, the employment rate in the country saw a slight uplift in January, marking an end to a year-long sequence of job shedding. In addition, a higher activity encouraged an expansion in purchasing activity, with inventories also rising as a result.