UAE businesses made a strong return to form in February, as higher orders and improved pricing helped with revenues – and profit margins. These factors helped push the speed of growth close to December’s levels, which was a 9-month high, according to PMI data from S&P Global.
On the downside, the private sector saw higher costs seep in for the first time in seven months. This has forced business owners to be a bit cautious about what they can expect through the rest of the year.
The (UAE private) sector is not without its challenges, as highlighted by a limited level of confidence in the year[1]ahead outlook,” said David Owen, Senior Economist at S&P Global Market Intelligence.
“Firms continue to feel the pressure of intense competition, which has capped price increases. Nevertheless, growing cost pressures resulted in a slight acceleration in selling price inflation in February.
“Additionally, businesses are eager to secure new work, which contributed to a rapid accumulation of backlogged orders.”
As has been a feature of recent months, the construction sector continues to be most active as new projects get off the ground. Developers are also pushing to secure project completion milestones to push offplan sales to new property investors.
New jobs are limited
Job creation continues to be subdued, a trend that became noticeable from mid-November, according to market sources.
“While some firms hired additional workers to increase their capacity,most kept employment unchanged,” says the S&P Global report.
And if the return of higher costs continue, it will give businesses a reason to pause on any new job additions they had planned on.
“While robust growth in business activity indicates that the pipeline of orders should eventually be addressed, other factors such as weak job creation and administrative delays pose risks to this outlook,” said Owen.
Payment issues
According to Owen, “(UAE) firms continue to report difficulties in securing payments from clients, an issue that appears to be ingrained in the wider market and may necessitate policy action to address.”
February PMI
The February Purchasing Managers’ Index score for the UAE stayed the same at 55, ‘signaling a sharp improvement in the health of the non-oil economy’. The index score is slightly higher than its long-run average of 54.4. (Anything over 50 shows in relative expansion mode as well as retaining higher confidence levels on what the future portends.)
“February proved to be another solid month for UAE non-oil businesses, with the latest survey data indicating further strong upturns in new orders and output,” said Owen. “A PMI reading of 55 suggests that growth has remained relatively steady since its recent high at the end of last year.”
Source: gulfnews