New business in the UAE's non-oil private sector expanded sharply in December while output levels rose at the fastest pace in nearly two-and-a-half years due to Dubai’s Expo 2020, improved tourism and increased spending amid the economic recovery, a survey showed on Wednesday. 

The seasonally adjusted IHS Markit UAE Purchasing Managers' Index (PMI) fell slightly to 55.6 in December from 55.9 in November, when it notched a 29-month high. 

"New work volumes rose sharply, supporting the fastest upturn in business activity for almost two-and-a-half years," said David Owen, economist at IHS Markit. 

New orders continued to rise sharply in December, despite the rate of growth easing to a three-month low. New export orders also expanded, albeit marginally. 

Workforce numbers also rose, although marginally, reflecting a further recovery in employment after a long period of decline. 

Businesses reported a much sharper increase in input prices, due largely to a rise in fuel and energy costs, as well as higher raw material prices. On the other hand, output charges fell for the fifth month in a row in December, with competition forcing businesses to offer discounts.  

The outlook for business confidence dropped to a three-month low in December, with just 14 percent of respondents giving a positive outlook, with some highlighting the risk of a tightening of business and travel restrictions due to the Omicron wave of the pandemic. 

"The next few months may prove more challenging, however, depending on how the Omicron variant impacts worldwide travel and local restrictions. Businesses also face the prospect of higher inflation, after the latest data indicated the fastest rise in purchase costs for nine months due to an increase in energy and raw material prices," said Owen.  

(Reporting by Brinda Darasha; editing by Seban Scaria)  

brinda.darasha@lseg.com 

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