KHALEEJ TIMES, Wednesday, Jan 05, 2022 | Jamada Al-Aakhirah 02, 1443
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The UAE’s non-oil private sector grew strongly in December, recording its
13th consecutive month of growth on the back of sharp expansion in new business.
The seasonally adjusted IHS Markit UAE Purchasing Managers' Index (PMI), an
indicator designed to give an overview of operating conditions in the non-oil
private sector economy, dropped to 55.6 in December, down only slightly from
November's 29-month high of 55.9. The index has signalled a strong improvement
in business conditions throughout the final quarter of 2021, thanks to Expo
Output, which measures business activity, rose to 62.7 in December from 61.6 in
November, its highest since July 2019.
But businesses also reported a much stronger rise in cost pressures that was
often linked to increased energy and fuel prices. Overall purchasing costs rose
at the sharpest rate since March, which often dissuaded firms from purchasing
"The PMI remained close to its recent peak, at 55.6 in December, showing that
the benefits to the economy from the Expo 2020 and the loosening of Covid-19
measures had remained strong throughout the final quarter of the year. New work
volumes rose sharply, supporting the fastest upturn in business activity for
almost two-and-a-half years,” said David Owen, economist at IHS Markit.
New orders continued to rise sharply in December, despite the rate of growth
easing to a three-month low. Increased travel, often due to the Expo 2020, and
strong demand from clients were again cited as key drivers of sales growth, said
Despite this, firms continued to struggle to keep up with demand, leading to a
sixth successive monthly increase in backlogs. Workforce numbers also rose,
albeit marginally, reflecting a further recovery in employment after a long
period of decline.
Inflationary pressures often led firms to limit their purchasing activity. Input
buying rose at the slowest rate in five months, while stock levels ticked up
only marginally. This was in spite of a further improvement in lead times, that
was the most marked since July 2020.
"The next few months may prove more challenging, however, depending on how the
Omicron variant impacts worldwide travel and local restrictions. Businesses also
face the prospect of higher inflation, after the latest data indicated the
fastest rise in purchase costs for nine months due to an increase in energy and
raw material prices," said David Owen.
Looking ahead, business confidence regarding future activity dropped to a
three-month low in December, with just 14 per cent of respondents giving a
positive outlook. While firms hope that the strong growth trend will continue,
some highlighted the risk of a tightening of business and travel restrictions
due to the Omicron wave of the pandemic.