The UAE’s non-oil sector remained in the expansion territory at the start of the final quarter of 2024, supported by a marked and faster increase in business activity, as demand rose and firms maintained efforts to contain backlogs. However, growth of new orders softened to its lowest since February 2023, which contributed to both weaker job creation and a renewed drop in selling charges.
At 54.1 in October, the seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) remained firmly above the 50.0 neutral mark, signaling an improvement in the sector’s health. The index increased slightly from 53.8 in September but remained weaker than the readings of the first half of the year.
Meanwhile, non-oil companies in Dubai registered a slower improvement in operating conditions during October. At 53.2, the headline PMI was down from 54.1 in September and at a three-month low, contrasting with a slight pick-up in growth across the UAE as a whole.
As non-oil business activity continued to expand, business sentiment across the UAE picked up from September’s 18-month low, with firms expecting growth to continue in 2025. The rate of input cost inflation dipped to the lowest since April, further supporting the positive outlook.
Higher sales volumes support non-oil growth
Driving the UAE’s PMI higher was a sharper expansion in business activity levels at non-oil companies in October. Following September’s three-year low, the pace of growth improved to the quickest since April. Firms raised output in response to higher sales volumes, healthy work pipelines, and robust client numbers. More than a quarter of survey respondents posted a rise in activity over the month, whereas just 4 percent saw a decline.
“The main factor keeping the PMI above its previous reading was an expansion in business activity, which accelerated notably, albeit from September’s three-year low. Nevertheless, there are some reasons to suggest this could hold up, not least that firms are still seeing a long pipeline of work backlogs and ongoing contracts. This may ensure that the non-oil economy can continue to grow even if sales momentum slows further, though it may be more difficult to keep up this pace,” stated David Owen, senior economist at S&P Global Market Intelligence.
Employment numbers rise slower
Softer new business growth across the UAE’s non-oil sector contributed to the weakest rise in employment numbers in two-and-a-half years. However, input purchasing growth remained sharp as businesses faced additional efforts to overturn the recent trend of backlog accumulation. This trend persisted in October but eased slightly as firms reported an increase in work-in-hand.
“Firms in the survey panel frequently indicated that crowding in the market was eating into sales, and hitting job creation which slipped to a 30-month low,” he added.
Price pressures ease
As business activity expanded, the latest survey data revealed that UAE non-oil firms reported the softest increase in overall input costs in six months. The report also revealed a slowdown in both purchase prices and wages, with the latter registering the weakest pace of inflation in almost a year. Nevertheless, some firms reported higher prices for materials, equipment, and office supplies.
“Firms reduced their output prices for the first time in six months in a bid to try and reverse this slowing sales trend. Positively, this came at the same time as input price pressures softened, likewise to a six-month low,” Owen added.
Average prices charged decreased for the first time since April. The PMI report attributed the modest decline to firms needing to be more competitive, as well as the pass-through of some cost savings.
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