Business activity in the non-oil private sector economies of Saudi Arabia and the UAE gained further momentum in February, shaking off Omicron-related uncertainties as new business rose amid robust consumer demand.
The seasonally adjusted Saudi Arabia Purchasing Managers’ Index rose to 56.2 in February from 53.2 recorded in January, marking the first uplift in the index since last September. The latest reading signalled a strong improvement in operating conditions that was the fastest recorded in three months.
A reading above the neutral level of 50 indicates expansion while one below it points to a contraction.
"The latest PMI figures confirmed that the impact of the Omicron wave on the non-oil economy was only mild,” said David Owen, an economist at IHS Markit.
“Following two months of relatively soft (but still positive) growth, momentum rebounded strongly in February as cases began to fall.”
A surge in new business primarily drove the non-oil economic growth in the kingdom. Businesses surveyed attributed a marked upswing in sales owing to rising customer demand and falling Covid-19 cases. Some panellists cited increased marketing efforts and competitive pricing strategies as expansion drivers.
In contrast to the overall sales trend within the kingdom, new export orders fell for the second month on the back of rising competition in international markets and subdued demand in some parts of the world that are still struggling to cope with Omicron infections.
"Overall sales picked up at the quickest rate since last November, despite a further slight fall in export demand, while activity growth moved closer to the peak levels seen towards the end of last year," Mr Owen said.
Coronavirus infections rose sharply across the world after the more transmissible Omicron strain was detected in November. The wave of new infections forced countries, particularly in Europe and Asia, to impose more movement restrictions to curb the pandemic.
However, these curbs are now being rolled back as deaths and hospital admissions remain low. European countries have opened up their borders, while the UK has ended its Covid-19 protocols. Some Asian nations are following suit.
Although Covid-19 headwinds remain and supply bottlenecks persist, businesses in the kingdom said they were generally able to raise output in line with client demand. There was a "mild uplift in employment numbers" as well.
The overall sentiment about future business activity rose to the highest level since January last year, amid hopes that market conditions will improve further as the kingdom emerges from the Omicron wave and its client order book will continue to strengthen.
Meanwhile, the February data also pointed to a marked improvement in the health of the UAE's non-oil private sector economy.
The UAE gauge climbed to 54.8 in February from 54.1 recorded a month earlier on the back of a strong growth in market demand. Output levels subsequently rose, while increased optimism for future sales encouraged firms to expand their input purchases to the highest level in two-and-a-half years.
Central to the upturn was a further substantial rise in new orders across the non-oil sector, which panellists attributed to a recovery in demand and increased travel activity. The rate of growth picked up from January, but was lower than the levels seen during the final quarter of last year when Expo 2020 Dubai began.
"Growth in the UAE non-oil economy continued to run at a strong clip in February," Mr Owen said. "The upsurge was widely linked to rising client demand, with businesses also pointing to growth in tourism as the Expo 2020 continued and countries loosened their travel measures."
The UAE, which is ranked among the world's top nations in terms of its Covid-19 testing and vaccination regime, has also eased pandemic-safety restrictions as the number of cases declined sharply over the past few weeks. It was the first in the region to open its borders for tourism during the pandemic after it rolled out a mass inoculation programme.
The number of visitors to Expo 2020 Dubai rose to more than a million in the seven-day period to March 1, bringing the total close to 16 million since the world's fair began. Weekly numbers have been regularly exceeding the one-million mark, making February a record month for the Expo, with 4.4 million visits.
Businesses are also confident that sales will increase markedly over the coming months. The year-ahead outlook for business activity rose to a four-month high and was the second-highest since the middle of 2020, according to the survey.
As opposed to Saudi Arabia and the UAE, the February PMI data in Egypt signalled a deceleration in business activity, as price pressures weighed on business confidence and consumer spend. Output levels fell, while there was further reduction in input buying and employment in the country.
Egypt's PMI gauge posted 48.1 in February, staying below the 50 neutral mark for the 15th month running and was only fractionally higher than January's nine-month low of 47.9.
"The pandemic-led surge in input prices and the Omicron wave continued to derail Egypt's recovery in the first quarter of 2022," Mr Owen said.
