UAE business conditions deteriorate in January

UAE non-oil private sector health declined in January, according to the IHS Markit UAE Purchasing Manager’s Index (PMI) for the month.

The seasonally adjusted index fell to 49.3 in January, falling below the 50.0 mark, and down from December’s 50.2, indicating a slight deterioration in business conditions.

“The IHS Markit UAE PMI continued to worsen in January, and this month fell below the 50.0 mark that separates growth from contraction for the first time in over 10 years,” said David Owen, an economist at IHS Markit.

A fall in employment among UAE companies was key to the country’s decline in business conditions. This was likely related to cost-cutting strategies as firms look to streamline costs, the report said.

Total new orders also fell for the second time in three months as firms reportedly struggled with a slower domestic business environment. However, new orders from abroad continued to grow for the third month in a row and at a faster rate than in December. Overall, the total drop in new business “was only fractional,” the report said.

“Looking ahead, it is hoped by many firms that the upcoming Expo 2020 will restore new business volumes and kick-start activity. Another bright note is growing momentum in export sales, which businesses have attributed to stabilization in some international markets,” Owen added.

PMI readings vary between 0 and 100, with a reading above 50 indicating an increase compared to the previous month, and below 50 an overall decrease.