Business conditions in the United Arab Emirates improved at the fastest pace in 20 months, taking a sharp turn for the better with the vaccine rollout and an upswing in construction work.
Non-oil private sector activity grew for a fourth month in March, the longest run of expansion since late 2019, according to IHS Markit. Its UAE Purchasing Managers’ Index rose to 52.6 from 50.6 in February.
By contrast, Saudi Arabia’s recovery lost some momentum, with its non-oil economy suffering from a slowdown in sales and worsening expectations by firms. The kingdom’s PMI fell to 53.3 in March from 53.9 in the previous month.
“Improving construction sector activity acted as a sorely-needed boost to the UAE non-oil economy in March,” said David Owen, economist at IHS Markit. “Business confidence improved to an eight-month high, with vaccine optimism driving confidence in future activity.”
The Arab world’s two biggest economies are on the mend as their inoculation efforts and higher oil prices power a rebound from last year’s recessions. The improvements shown by PMIs last month mirror results from around the world as manufacturing surges from the U.S. to Asia.
A revival of construction in the UAE could be a game-changer for an economy whose bellwether real estate sector has seen years of declines in property prices. IHS Markit said “a key factor to growth” last month were efforts to restart building work as the sector experienced “a sharp pick-up.”
Other details from the PMI reports:
- An index tracking output in the UAE registered its highest reading in over a year and a half.
- The pace of purchasing activity growth slowed to the weakest in four months.
- New-work inflows rose, with the rate of expansion accelerating to an eight-month high.
- Employment numbers were only down slightly as the rate of job losses was “much softer” than before.
- Outlook for the coming 12 months was the highest since July 2020, improving for a fourth straight month; it was still subdued compared with the series average.
- The Saudi PMI gauge has now dropped by 3.8 points from its peak in January
- An index tracking new order growth slowed for the third straight month and had the biggest negative effect on overall activity.
- Companies indicated caution around the speed of the economic recovery from Covid-19.
- Employment was “largely stable” as the increasing output encouraged firms to expand purchasing.
- Outlook among Saudi firms dropped to a nine-month low.
“March PMI data pointed to weaker growth in non-oil business conditions in Saudi Arabia, suggesting a cooling off in the economic recovery since the start of the year,” Owen said.