UAE: PMI falls to three-month low in February, but remains in expansionary territory


UAE: PMI falls to three-month low in February, but remains in expansionary territory

The IHS Markit Purchasing Managers’ Index (PMI) ticked down to a three-month low in February, clocking in at 50.6 and down from January’s 16-month high of 51.2. Consequently, the index remained above the 50-points threshold, indicating an improvement—albeit only marginal—in business conditions in the non-oil private sector.

February’s slowdown was a consequence of a spike in daily Covid-19 infections, which prompted the tightening of restrictions to curb the spread of the virus, tempering sales. As such, output increased only modestly in February as demand was muted due to containment measures. Moreover, new orders stalled in February after expanding for three straight months, while exports dipped slightly. Global supply chain disruptions also capped output growth as shortages of raw materials and reduced transport capacity delayed the delivery of inputs. Meanwhile, employment levels remained broadly unchanged in the period.

On the price front, input prices rose only mildly which allowed for some firms to continue to offer discounts in a bid to increase demand, leading to the fall in average output prices. Lastly, business expectations regarding the coming 12 months increased to a five-month high bolstered by the rapid rollout of the vaccine and the prospect of gains from the Expo 2020—rescheduled for this year. However, renewed restrictions and elevated uncertainty capped the improvement.

Commenting on February’s result, David Owen, economist at IHS Markit, noted:

“New orders failed to grow for the first time since last October, while output growth softened since the start of the year. Reports of weaker demand were largely led by those sectors that saw the harshest restrictions, although some firms on the production side were also hard-hit by customs delays and global shipping problems.”

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