UAE: PMI remains at 16-month high in January

UAE PMI January 2021

UAE: PMI remains at 16-month high in January

The IHS Markit Purchasing Managers’ Index (PMI) was stable at 51.2 in January, matching December 2020’s print. As such, the index remained slightly above the 50-point threshold, signaling a mild improvement in business conditions in the non-oil private sector. The reading marked the joint-highest print since August 2019.

January’s result reflected a solid expansion in activity due to the resumption of construction projects as well as robust output growth, although it eased from December’s five-month high. Exports increased in January thanks to growing demand in the Gulf region, which in turn led to more new business. Moreover, employment levels improved during the month, thus ending a year-long period of job losses.

On the price front, input costs decreased at the sharpest pace since April 2020 as purchase prices increased at a softer pace, while selling prices continued to decrease—although at the mildest pace in 28 months. Lastly, firms’ outlook for the coming 12-month period picked up only mildly, as an uptick in domestic Covid-19 cases and a potential tightening of restrictions tempered optimism despite the current quick vaccine rollout.

Commenting on the outlook, David Owen, economist at IHS Markit, noted:

“With firms still having to make up lost ground from the Covid-19 lockdown, the pace of recovery so far appears subdued. The rapid roll-out of Covid-19 vaccines in the UAE should help to restore confidence in markets over the first half of 2021, although firms were still relatively downbeat about future growth in January. Higher case numbers provided concerns of tighter restrictions in the short-term, which could present further challenges for businesses.”

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