Expo boosts UAE private sector growth to fastest since June 2019

Originally published on Nov 07, 2021 | Khaleej Times

The UAE non-oil sector posted a marked increase in new business during October, driven by rising spending and tourism amid the opening of Expo 2020.

According to IHS Markit UAE Purchasing Managers' Index (PMI), economic indicators derived from monthly surveys of private sector companies, confidence regarding future activity also improved significantly.

The PMI surged to 55.7 in October, from 53.3 in September. This was the highest reading since June 2019.

An economist at IHS Markit, David Owen said that the Expo 2020 brought a highly welcome upsurge in growth across the non-oil private sector.

"The increases in both output and new business were sharp and the most marked since July 2019. In addition, the boost to sales led more companies to predict a rise in activity over the next 12 months, as optimism jumped to the highest level since the beginning of the pandemic," he said.

"The key test for the UAE economy will be whether this initial uplift in demand from the Expo can be sustained over the coming months. We also wait to see whether this will strengthen employment growth, as latest data showed a subdued rate of hiring despite growing pressure on business capacity."

According to panelists, Expo drove increased sales in several sectors as tourism strengthened and investment spending rose. In contrast to domestic sales, export orders ticked up only marginally at the start of the fourth quarter.

In addition to Expo, firms noted that the loosening of pandemic restrictions also helped to boost activity.

However, there was a pile-up of outstanding work during October. Backlogs rose at a solid pace, albeit one that was slightly softer than in September. While some firms added to their workforces to relieve capacity pressures, employment growth was only marginal overall.

The latest data also signaled a slowdown in the overall rate of input cost inflation across the non-oil economy. Purchase costs ticked up only slightly, while staff costs fell for the first time since January. As such, overall expenses rose at the softest pace for five months.

Importantly, forecasts for future output improved considerably in October as overall optimism was the strongest since March 2020