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A rise in COVID-19 cases driven by the Omicron variant has affected growth in Dubai's non-oil private sector economy in January, according to the results of a business survey released on Wednesday.
The seasonally adjusted IHS Markit Dubai Purchasing Managers' Index (PMI) fell for the first time in four months, from 55.3 in December to 52.6 in January, indicating a solid upturn in business conditions across the non-oil private sector.
Th latest PMI data indicated a much weaker increase in new business following December's 29-month high.
The survey, which covers the Dubai non-oil private sector economy, with additional sector data published for travel & tourism, wholesale & retail and construction, showed that supply chain challenges and price pressures also persisted, “although firms continued to see a strong recovery in activity following looser stringency measures.”
David Owen, an economist at IHS Markit, said that despite the slowdown in sales growth, business activity continued to rise at a sharp pace, "although this could be further impacted in the coming months if demand does not recover quickly."
Output levels continued to rise at a sharp pace during January as economic conditions improved from the effect of the pandemic. The construction output expanded; the joint-strongest since mid-2019. However, slower expansions in the wholesale & retail and travel & tourism sectors meant that the overall increase in non-oil activity was slightly weaker than in December.
Supply chain challenges remained evident in the non-oil sector in January with businesses often reporting delays in the shipment of goods. Supply pressures also led to rise in purchasing prices though the pace of inflation eased from a nine-month high in December.
Businesses were less confident for the year ahead, as output expectations slipped to the lowest since last May. Hiring also slowed resulting in a broadly unchanged level of employment from December.
"Going forward, Dubai businesses expect market conditions to continue to improve as the pandemic hopefully has a more limited impact through 2022. However, the latest data signals that the economy is not yet immune to new waves and could also face further disruption on the supply side," said Owen.
(Reporting by Brinda Darasha; editing by Seban Scaria)
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