UAE's non-oil private sector businesses faced fresh disruptions in February as rising COVID-19 cases hampered sales and affected businesses.
Business expectations improved, but only gradually as restrictions led to further uncertainty about short-term growth prospects despite hopes for a rebound in the latter half of 2021, a survey showed on Wednesday.
The seasonally adjusted IHS Markit UAE Purchasing Managers' Index (PMI), which covers manufacturing and services, was at 50.6 in February compared to 51.2 in January, indicating a slower and only marginal improvement in business conditions.
However, the rate of output growth slowed from the previous month and was modest, as a number of firms commented on weaker demand trends due to stricter COVID-19 restrictions on areas such as retail and services.
David Owen, Economist at IHS Markit, said: "The tightening of COVID-19 restrictions in February had a notable impact on the UAE economy, according to
PMI survey data. New orders failed to grow for the first time since last October, while output growth softened since the start of the year."
The non-oil private sector was also hit by a slight drop in export sales, after a sharp upturn was recorded at the start of the year.
On the positive side, the impact on cost pressures was limited as input prices rose only slightly over the latest survey period.
Employment numbers were largely stable in February, as unchanged sales volumes meant that companies saw little pressure on capacity and were able to lower backlogs for the sixth month running.
The firms surveyed said that new restrictions made the near-term outlook more uncertain, although the rapid rollout of COVID-19
vaccines and projected new business gains from the Expo 2020 meant that firms were generally optimistic of an improvement in the economy later in the year.
"Only 6 percent of businesses gave a positive outlook for the next 12 months, with overall sentiment remaining one of the weakest seen in the series history," Owen said.
(Reporting by Seban Scaria; editing by Daniel Luiz)
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