Saudi, UAE Business Activity Slows as Virus Cases Rise


(Bloomberg) — Business conditions in the Arab world’s two largest economies improved at a slower pace in February as coronavirus cases crept up and employment figures dipped.

Weaker demand, faltering sentiment and job cuts weighed on non-oil private sector activity in the United Arab Emirates and neighboring Saudi Arabia according to Purchasing Managers’ Indexes compiled by IHS Markit. The overall benchmarks remained above the 50 mark that separates growth from contraction.

In Saudi Arabia, a gauge tracking employment fell for a third straight month, as companies reduced their workforce despite higher demand, signaling recovery in the job market is lagging behind the rebound in activity. In the UAE, where authorities have reimposed some virus-related restrictions, customer sales slowed.

“The tightening of Covid-19 restrictions in February had a notable impact on the UAE economy,” IHS Economist David Owen wrote. “The return to stricter lockdown measures meant that many firms’ expectations for future output growth remained subdued in February, despite the success of the UAE’s vaccine program paving the way for a reopening of the economy later in the year.”

  • The UAE’s PMI fell to 50.6 in February versus 51.2 in the previous month
    • Business expectations improved ‘gradually’ with virus restrictions leading to more uncertainty for short-term growth prospects while new business didn’t rise for the first time in four months.
    • Some companies noted weaker demand due to stricter restrictions on sectors including retail and services.
    • Input prices rose “only slightly” as the impact on cost pressures was limited but some firms offered discounts to increase demand, leading to a drop in selling charges.
    • Sentiment remained one of the weakest seen on record as only 6% of respondents gave a positive outlook for the coming year period.
    • Workforce numbers were mostly flat and a few firms saw workers leave voluntarily.
  • Saudi PMI dropped to 53.9 in February from January’s recent high of 57.1
    • Rate of growth eased to a four-month low as output and new orders expanded at a slower pace.
    • Firms were hopeful that Covid-19’s effect will alleviate, but optimism fell to the lowest since October.
    • An uptick in business confidence led to higher sales.
    • Firms continued to stock up inventories with hopes of an economic rebound from the downturn.
    • Firms anticipated a “rocky start” to the year due to global lockdowns, though the distribution of vaccines is seen having a significant impact on economic activity during the second half of 2021.

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