The seasonally adjusted IHS Markit UAE Purchasing Managers' Index fell to 49.1 in February from 49.3 in January
DUBAI - The United Arab Emirates (UAE) private sector deteriorated further in February, with output expectations dropping to a near-two-year low amid fears of the coronavirus's impact on exports and supply chains, a survey showed on Tuesday.
The seasonally adjusted IHS Markit UAE Purchasing Managers' Index (PMI), which covers manufacturing and services, fell to 49.1 in February from 49.3 in January. Readings above 50 indicate expansion; readings below point to contraction.
Dubai, one of the main cities in the UAE, is the Middle East's trade, finance, and transportation hub, in addition to being a tourism destination, and sustained global uncertainty due to the outbreak of the new coronavirus is expected to weigh on its economy.
The headline PMI reading of 49.1 was the UAE's lowest since August 2009, a year which marked the beginning of a debt crisis in Dubai.
The private-sector contraction reflected a decline in output, new orders and employment, said David Owens, economist at IHS Markit and author of the survey.
"Supplier performance was meanwhile hit by the coronavirus outbreak in China, with PMI surveys globally noting significant delays to freight deliveries, as well as weaker export demand," he said.
He added that business expectations were undercut by fears that the outbreak could put pressure on an already struggling domestic economy. "As a result, confidence for future output fell to a near two-year low."
Export orders also dropped because of the coronavirus, according to the survey, hurting overall sales.
Growth in the UAE's non-oil private sector slowed last year, hitting a decade-low in December, but the private sector started shrinking this year for the first time in a decade.
Dubai’s hospitality industry faces the biggest risk in the Gulf region from travel restrictions triggered by the coronavirus outbreak, rating agency S&P Global said last month.
Employment in the private sector dropped for the second month in a row in February, though at a slower rate than a month earlier, the survey said.
Companies that cut jobs attributed this mainly to efforts to reduce staff costs, with some also mentioning lower demand.
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