Business conditions in the UAE non-oil private sector strengthened sharply in March, with order inflows driving an increase in output levels. The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) reveals that business optimism in the UAE recorded its highest levels in 6 months with firms experiencing a softer increase in expenses.
Despite the growth in the UAE’s non-oil private sector, companies faced some hurdles in March. First, firms experienced considerable workload pressure due to administrative delays and growing constraints due to the Red Sea shipping crisis. This led to the joint-fastest accumulation of backlogs of work in the survey’s nearly 15-year history. Moreover, margins appeared to worsen in the UAE as increased competition contributed to the strongest drop in output prices in three-and-a-half years.
Therefore, the UAE’s non-oil sector PMI registered 56.9 in March, slightly down from 57.1 in February.
Strong demand supports growth
Strong demand continued to support the growth of the UAE’s non-oil private sector, with firms seeing a sharp increase in new order volumes in March. The rate of expansion also saw a sharp increase from February’s six-month low. However, it remained softer compared to January. Notably, companies cited rising client spending and marketing campaigns as reasons for the increase in order inflows. Export sales also saw a modest increase in March.
Therefore, businesses in the UAE’s non-oil sector increased their output levels considerably. In fact, 31 percent of respondents saw an increase in activity in March. Moreover, firms revealed that projects in their pipelines and promotional activity drove growth.
“The overall picture for the UAE non-oil private sector remained rosy at the end of the first quarter. The latest PMI reading of 56.9 in March signaled a robust upturn in business conditions, with order book inflows and activity levels still growing sharply,” stated David Owen, senior economist at S&P Global Market Intelligence.
Read: UAE’s GDP to grow by 4.2 percent in 2024, rising to 5.2 percent in 2025: Central Bank
Backlogs of work prove challenging
Despite the increase in output, UAE businesses struggled to finalize new work in March. This resulted in an increase in backlogs of work on record. The increase in client demand placed great pressure on administration teams. Moreover, Red Sea shipping disruptions impacted business capacity. The crisis also impacted delivery times with firms signaling the weakest supplier performance in a year. However, businesses in the UAE’s non-oil private sector recorded a decline in lead times.
In the UAE, non-oil companies saw only a modest rise in input costs in March due to a weaker increase in purchasing prices. Moreover, selling prices fell at the sharpest rate for three-and-a-half years, which firms linked to growing competition and the need to retain customers. Firms also raised their employment numbers at a pace above the series trend for the second straight month.
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