The seasonally adjusted IHS Markit UAE Purchasing Managers’ Index (PMI), which covers manufacturing and services, slipped to 50.6 in February from 51.2 in January, remaining just above the 50 mark that separates growth from contraction.
The output sub-index slid to 51.8 from January’s 53, while new orders also fell.
“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,” said David Owen, economist at survey compiler IHS Markit.
“Reports of weaker demand were largely led by those sectors that saw the harshest restrictions, although some firms on the production side were also hard-hit by customs delays and global shipping problems.”
In early February, Abu Dhabi, the UAE’s capital, brought back some restrictions on workplace capacities and leisure activities to curb a rise in COVID-19 cases. The measures followed fresh restrictions imposed by business hub Dubai.
The United Arab Emirates recently overtook Saudi Arabia as the Gulf Arab country with the highest number of recorded COVID-19 cases, according to Reuters data based on government statistics. The UAE recorded 2,526 new cases on March 1 versus Saudi Arabia’s 317, the data showed.
But Saudi Arabia lags in vaccinations as it has administered enough doses to inoculate around 1.1% of its roughly 34 million population, while the UAE has administered enough doses to vaccinate about 30.8% of its population of nearly 10 million, one of the highest rates in the world.
The new restrictions led to expectations for future output remaining subdued despite the vaccine rollout.
“Only 6% 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.