Consumer confidence surges as non-oil sector sustains upswing

Consumer confidence in the UAE economy and private business continued to surge as the health of the non-oil private sector economy sustained its upswing, according to analysts and economists.

The upturn was driven by the trickle-down effect of higher oil prices and a robust tourism activity resulting from Expo 2020, according to the latest research by leading consumer intelligence company, D/A.

“Positive sentiment toward business and economy in the UAE has been buoyed by some of the highest hotel occupancy rates in the world, substantial economic investment and the adept handling of global crises. Business confidence increased over 2.0 per cent, and economic confidence increased by 0.5 per cent in January,” Paul Kelly, managing partner of D/A.

The IHS Markit UAE Purchasing Managers’ Index ticked up for the first time in three months, from 54.1 in January to 54.8 in February, and remained well above the 50.0 neutral threshold. Firms saw a further strong uplift in market demand. Output levels subsequently rose sharply, while increased optimism for future sales encouraged firms to expand their input purchases to the greatest extent in two-and-a-half years.

The International Monetary Fund, in its latest report, has commended the UAE government for the way it steered the country’s economy through the pandemic.

The economic recovery is gaining momentum, due to the UAE’s accelerated efforts and health responses, continued supportive macroeconomic policies, and rebound in tourism and domestic activity related to the delayed Expo 2020, the IMF reported.

The World Bank was also bullish about the economic growth of the UAE, saying it will accelerate this year compared to 2021, growing at 4.6per cent in 2022 against 2.6per cent in 2021.

The UAE will benefit from higher oil prices and a strong rebound in the non-oil sector, the World Bank said. Its growth forecast is higher than the UAE Central Bank’s projection of 4.2 per cent growth for 2022.

David Owen, economist at IHS Markit, said the growth in non-oil economy continued to run at a strong clip in February, with the PMI up to 54.8 but remaining slightly lower than the post-Covid highs seen during the final quarter of 2021. The upsurge was widely linked to rising client demand, with businesses also pointing to growth in tourism as the Expo 2020 continued and countries loosened their travel measures.

“While output expanded sharply in February, firms still reported a lack of capacity to deal with new orders, linked to weak hiring momentum and challenging global supply conditions. On the plus side, local vendors were able to deliver available inputs more quickly, and there are signs that supply problems are slowly easing as the world emerges from Covid restrictions. This should aid businesses in relation to both capacity and cost pressures in the coming months,” said Owen.

The year-ahead outlook for business activity, according to the PMI survey, rose to a four-month high, and was the second-highest since the middle of 2020. “This confidence spurred businesses to increase their efforts to stockpile and purchase greater amounts of inputs, with the latter rising at the fastest rate for two-and-a-half years. Inventories also expanded, albeit only slightly. Despite higher sales, non-oil companies struggled to take on additional workers during February, as latest data signalled a broadly unchanged level of employment,” said the report.

— issacjohn@khaleejtimes.com