UAE: New business growth strengthens to 20-month high

Dubai - UAE business expectations improve for the fifth consecutive month: PMI

The UAE private sector experienced a solid improvement in business conditions at the start of the second quarter as new business growth strengthened to 20-month high.

Business expectations also climbed for the fifth month running, amid hopes of a continued recovery from Covid-19 and an uplift in sales from the Expo 2020 later in the year, a survey report by IHS Markit said.

The IHS Markit UAE Purchasing Managers’ Index rose to its highest since mid-2019, supported by a strong rise in new business volumes and a sharp expansion in output that were linked to a continued economic recovery from Covid 19, the PMI survey report said.

The report echoes the upbeat projection of the Central Bank of the UAE forecasting non-oil GDP likely to grow 3.6 per cent this year while oil GDP is likely to remain flat because of production cuts agreed by Opec and its allies.

Real non-oil GDP growth is expected to be driven by increasing fiscal spending, pick up in credit and employment, relative stabilisation of the real estate market, boosted by recovery in confidence and the Dubai Expo in 2021.

On the right track

The IHS Markit PMI rose to 52.7 in April from 52.6 in March, pointing to a solid improvement in the health of the non-oil sector.

While employment fell for the third month in a row, however, contributing to a renewed increase in backlogs of work, output charges increased for the first time in over two-and-a- half years.

David Owen, economist at IHS Markit, said the UAE non-oil economy remains on the right track to a recovery from Covid-19 as latest PMI data suggests.

The headline index rose to a 21-month high of 52.7, supported by strong expansions in output and new orders, the latter growing at the fastest rate since August 2019.

“That said, the rate of improvement in operating conditions was still below the 12-year survey average, reflecting further pandemic-related disruptions for a number of businesses and sectors,” said Owen.

“Firms also saw capacity pressures emerging in April, indicated by an increase in backlogs. Employment has been slow to react to rising demand so far this year, having fallen for three months in a row, but could start to rise as these pressures intensify ongoing projects,” he said.

UAE shows resilience

The report said backlogs rose for the first time in eight months, partly due to a delay in input shipments faced by some companies.

Another factor causing higher volumes of outstanding business was a slight fall in employment as firms decided to contain payroll costs rather than increase operating capacity, according to the report.