The UAE's non-oil private sector businesses have lost momentum since the end of 2021 as rising COVID-19 cases curbed demand growth. Companies have endured the fastest rise in cost pressures in ten months, which in turn has limited purchasing activity and job creation, according to a new business survey.

The seasonally adjusted IHS Markit UAE Purchasing Managers' Index (PMI) fell to 54.1 in January from 55.6 in December.

However, the index signalled a strong improvement in operating conditions, but it was the slowest seen since September last year.

While the economic recovery and strong sales from Expo 2020 Dubai increased business activity, output across the non-oil sector rose due to a sharp rise in new work.

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"UAE's non-oil sector entered 2022 on a strong footing, as businesses continued to enjoy the benefits of a recovery in economic conditions and increased demand from the Expo. The latest data further solidified this footing, but perhaps showed the first signs that growth had started to tail off," David Owen, Economist at IHS Markit, said.

“Part of this was down to the Omicron surge as rising cases led to increased uncertainty among consumers and businesses, as well as tapering the rebound in tourism. The sector could quickly recoup this momentum in the coming months as the Omicron wave appears shorter than previous ones," he added.

Businesses had to face intense input price pressures in January, as the rate of inflation ticked up to the highest recorded since last March. Raw materials were often cited as up in price, while global transport costs continued to surge upwards due to supply-chain bottlenecks, IHS Markit said in its report.

The rise in expenses placed even greater pressure on firms’ margins, as output charges continued to fall amid efforts to boost sales, it said.

Inflationary concerns also affected recruitments. January saw a marginal rise in employment.

According to the survey growth predictions were again closely tied to hopes of a broad recovery in market demand and an easing of the pandemic.

(Writing by Seban Scaria; editing by Daniel Luiz)

 (seban.scaria@lseg.com)

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