The UAE’s non-oil sector witnessed a surge in new business levels last month due to a solid increase in export sales and reports of strong local market conditions. However, the rate of expansion slowed and was the second-weakest in a year and a half.
The UAE’s non-oil sector saw the weakest expansion in business activity in three years at the end of the third quarter of 2024. The slowdown in growth was accompanied by a weaker rise in new orders and softer job creation.
The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) declined to 53.8 in September from 54.2 in August. Although the reading remained well above the 50.0 mark separating growth from contraction, the index was at its second-lowest in three years, beating only July’s reading of 53.7.
Price hikes persist
Firms in the UAE’s non-oil sector continued to raise prices in September following another sharp increase in costs, with shipping, petrol, technology, and maintenance costs often reported as sources of inflationary pressures.
September’s PMI data signaled a faster increase in average prices across the non-oil economy, marking the fifth consecutive month of inflation after a period of discounting. The report revealed that the rise was the strongest since the beginning of 2018, which firms attributed to rising sales and purchase prices.
Despite the rise in average prices, the rate of overall cost inflation in the UAE eased to the weakest since April.
“Competition remained another area of difficulty, with panelists reporting that tougher market conditions had led to a more cautious outlook for the upcoming year – output expectations are now at their lowest since early 2023,” stated David Owen, senior economist at S&P Global Market Intelligence.
Activity growth slows
Despite indicating robust gains, rates of growth in activity and new business across the non-oil economy slowed at the end of the third quarter. Business activity rose at the slowest pace since September 2021, despite widespread reports from firms that rising demand had boosted output. With new order growth softening, businesses reported fewer hires in September, driving the mildest rise in total employment since the end of 2022.
“The survey data also suggested that firms opted to maximize revenues whilst sales were still strong, as output charges rose at the fastest rate for over six-and-a-half years. This was partly due to cost pressures remaining strong in September, though there was a bit of relief on this front compared to the last few months, which could be a sign that the inflationary trend will lessen,” added Owen.
The report also noted an expansion in the UAE non-oil sector’s sales pipelines in September, which the survey data noted due to a considerable rise in backlogs of work. Backlog accumulation, which has been substantial since February, rose further last month to a four-month high.
Dubai economic activity surges
Amid a slowdown in the UAE’s non-oil sector, the Dubai PMI signaled a robust expansion in business conditions across the non-oil private sector in September. Overall activity levels rose at the fastest pace in four months, despite a slower upturn in new business volumes. Supplier performance also improved, though to a lesser extent amid reports of customs delays.
On the price front, the report revealed a sharp rise in overall input costs during September. However, the rate of inflation eased to a five-month low.
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