Business activity in UAE improves to strongest level since June 2019

Companies surveyed registered the quickest increase in purchasing since April due to a sharp rise in new orders

Russian folk dancers perform during Russia's National Day ceremony at Expo 2020 Dubai. The world's fair has helped to spur economic activity in the country. AP
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Business activity in the UAE's non-oil private sector improved to its strongest level in about two and a half years in November, on the back of increased economic activity from Expo 2020 Dubai, an improvement in tourism activity and increased spending amid the economic recovery.

The UAE's IHS Markit Purchasing Managers’ Index climbed to 55.9 in November from 55.7 in October, the highest reading since June 2019.

The rise in activity in the Arab world's second-largest economy was underpinned by a marked acceleration in output and new business volumes, according to the survey.

The reading pointed to "a robust improvement" in the health of the non-oil sector, which was faster than pre-coronavirus levels.

The sub-indexes of both new business and output hit their highest levels in more than two years, as companies cited a strong increase in demand due to an increase in tourism and activity spurred by the Expo.

Export sales also increased, although at a much softer pace than total new business.

"November data showed the UAE economy still running strong, with the rate of growth even accelerating from October when the start of Expo 2020 led to an upsurge in activity," said IHS Markit economist David Owen.

The PMI reading's rise to its highest since June 2019 signals that the global trade fair had helped to lead the non-oil sector back to pre-pandemic growth rates, Mr Owen said.

Businesses surveyed registered the quickest increase in purchasing since April due to the sharp rise in new orders, which prompted companies to expand their input buying during November.

The strong increase in demand weighed on stock levels, which rose only slightly in the survey period.

Employment levels remained steady during the latest survey period, while stock levels expanded at the weakest rate in a year.

"Further rises in demand and backlogs could support an increase in employment sooner rather than later," Mr Owen said.

In addition, output charges were reduced for the fourth month in a row as some businesses continued to struggle with strong competition, according to the survey.

Companies were optimistic regarding the outlook for future activity, owing to an expected rise in new business from the expo over the coming months, as well as an improvement in market conditions after the easing of lockdown measures.

The UAE economy has rebounded strongly from the pandemic-induced slowdown that tipped the global economy last year into its worst recession since the 1930s.

Mass inoculation campaigns and the government fiscal's support has helped businesses to recover. The entire population of the country has received one vaccine dose and 90.64 per cent of the population is fully vaccinated.

Emirates NBD, Dubai's largest lender, expects "to see improved growth momentum in the fourth quarter, as travel restrictions continue to be relaxed and Expo 2020 should boost domestic spending".

The UAE non-oil sector is forecast to grow 3.5 per cent this year, according to the lender.

Overall economic output is forecast to grow 2.1 per cent this year and expand 4.2 per cent in 2022, according to the Central Bank's second-quarter review.

Updated: December 07, 2021, 1:02 PM