Dubai: The UAE economy showed rapid growth in non-oil private sector economic activity in December, according to the latest Purchasing Managers Index (PMI) data.
PMI data released by IHS Markit showed growth at a steady pace throughout the fourth quarter amid the start of Expo 2020 and an easing of travel restrictions.
The PMI remained close to its recent peak, at 55.6 in December, showing that the economic benefits of Expo 2020 and the loosening of COVID-19 measures had remained strong throughout the last quarter of the year. ‘year, “said David Owen, Economist at IHS Markit.
The latest survey indicated another strong expansion in new business, while production levels have grown at the fastest rate in nearly two and a half years.
In contrast, companies have also reported a much larger increase in cost pressures, often linked to rising energy and fuel prices. Overall purchasing costs have increased at the fastest rate since March, often deterring companies from purchasing additional inputs.
Demand and jobs
New orders continued to rise sharply in December, despite the growth rate slowing to its lowest level in three months. Increased travel, often due to Expo 2020, and strong customer demand were again cited as the main drivers of sales growth. New export orders also rose, although the recovery slowed and was only marginal.
Data showed that the increase in new orders continued to support a marked expansion in non-oil private sector activity in December. In fact, the recovery has been the sharpest since July 2019, with around a quarter of respondents seeing an increase in production from November.
Despite this, businesses continued to struggle to meet demand, resulting in a sixth consecutive monthly increase in arrears. The workforce also increased, albeit marginally, reflecting a further recovery in employment after a long period of decline.
While businesses continued to benefit from strong demand, they also reported a much larger increase in input prices. This increase was largely attributed to rising fuel and energy costs, as well as rising raw material prices.
Unlike rising input costs, production costs fell for the fifth consecutive month in December. Discounts have been widely offered in response to stiff competition.
Looking ahead, business confidence in future business due to the Omicron wave of the pandemic.
“The next few months could prove to be more difficult, however, depending on the impact of the Omicron variant on global travel and local restrictions.
Businesses also face the prospect of higher inflation, after the latest data showed the fastest rise in purchasing costs in nine months amid rising energy and material prices firsts, ”Owen said.