RIYADH: The UAE’s non-oil economy maintained steady growth in January, driven by a rise in new orders, ‘favorable market conditions,’ and easing cost pressures, according to S&P Global.
The Emirates’ Purchasing Managers’ Index stood at 55, slightly down from December’s nine-month high of 55.4.
A PMI reading above 50 indicates growth in the non-oil sector, while a below 50 signals contraction.
The sustained expansion of non-oil business activity across the Middle East, including the UAE, highlights the region’s economic diversification efforts. Saudi Arabia posted a PMI of 60.5 in January, its highest level in a decade. Kuwait recorded a PMI of 53.4, followed by Egypt at 50.7, and Qatar at 50.2.
“The UAE PMI signalled another good month for the non-oil private sector in January, with the headline figure falling only slightly from December’s nine-month high,” said David Owen, senior economist at S&P Global Market Intelligence.
He added: “Robust expansions in activity and new business, as well as lower input cost inflation, suggest the economy is in a healthy position.”
S&P Global said non-oil businesses in the UAE experienced a sharp rise in sales volume, primarily driven by strong domestic demand.
Price pressures also eased, with input costs rising at their slowest rate in 13 months. The slowdown in inflation enabled firms to increase their purchases of inputs at the start of the year.
The PMI survey said favorable market conditions and strong client relationships led to faster delivery times among UAE non-oil businesses in January.
However, companies only recorded a modest increase in staff numbers, though the pace of hiring was the fastest since August.
“A persistently low rate of employment growth suggests that firms are lacking the ability to hire in order to tackle backlog issues,” said Owen. “Input resources similarly remain weak, which seems to be aggravating capacity pressures as work-in-hand rose at the quickest pace in eight months in January.”
Despite the positive trends, surveyed firms were less optimistic about their future outlook, with only 9 percent expecting growth over the next 12 months.
According to these firms, intense competition in the UAE’s non-oil sector was a key factor in dampening confidence.
“The broad decline in business confidence over the past few months will therefore be a surprise to some. Notably, total confidence was at its lowest level since December 2022,” said Owen.
He added: “Strong competition and cash flow concerns arising from heavy backlogs have appeared to sow doubt among firms that they can continue to boost their revenues, underlining efforts to reduce the gap between output and input prices.”
The survey said continued capacity strain was due to heightened demand and administrative challenges, such as slow client payments.
The rate of backlog accumulation accelerated to its fastest pace in eight months, it added.
Due to strong demand pressures, non-oil companies in the UAE raised their selling prices for the first time in four months.
S&P Global said business conditions in Dubai’s non-hydrocarbon sector remained promising, with the emirate’s PMI reaching 55.3 — slightly below December’s nine-month high of 55.5.
Non-oil firms in Dubai saw robust activity expansion in response to greater new business inflows.
Cost pressures also eased, with input price inflation slipping to a three-month low.
Employment and inventory levels saw fractional increases, reflecting a subdued outlook for future business activity.
Regarding future expectations, business confidence in Dubai’s non-oil sector dropped to its lowest level in over four years.
