UAE non-oil business sector grows strongly to 55.0 in January, PMI indicates

The UAE’s non-oil private business sector continued to expand robustly at the start of 2025, although capacity pressures and competitive challenges posed headwinds, a survey showed on Wednesday. The seasonally adjusted S&P Global UAE Purchasing Managers’ Index was 55.0 in January, slightly down from December’s nine-month high of 55.4, but well above the 50.0 mark indicating expansion.

Business activity and new orders show strong growth

Business activity and new orders rose sharply, driven by favorable market conditions and easing cost pressures, although at a slightly slower pace. The new orders sub-index eased to 59.0 in January, down from December’s 59.3, Reuters reported.

“Robust expansions in activity and new business, as well as lower input cost inflation, suggest the economy is in a healthy position,” said David Owen, Senior Economist at S&P Global Market Intelligence.

Read more: Experts forecast robust growth for the UAE economy in 2024 amid global challenges

Input cost inflation reaches a 13-month low

Input cost inflation fell to a 13-month low, enabling firms to increase purchases. However, capacity pressures persisted, with backlogs of work rising at their fastest pace in eight months.

“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,” Owen remarked, noting that total confidence was at its lowest level since December 2022.

A separate index for Dubai eased slightly to 55.3 from December’s 55.5, as businesses reported improved conditions but expressed subdued expectations for future activity.

The Purchasing Managers’ Index (PMI) is a key economic indicator that reflects the prevailing direction of economic trends in the manufacturing and service sectors. It is compiled and released monthly by the Institute for Supply Management (ISM) and serves as a diffusion index summarizing market conditions as perceived by purchasing managers.

Key features of PMI

• Survey-based: The PMI is derived from a monthly survey sent to senior executives at over 400 companies across 19 primary industries. The survey covers various aspects of business conditions, including new orders, inventory levels, production, supplier deliveries, and employment. 
• Index value: The PMI is expressed as a number between 0 and 100. A PMI reading above 50 indicates economic expansion compared to the previous month, while a reading below 50 signifies contraction. A reading of exactly 50 indicates no change in economic conditions. 
• Leading indicator: The PMI is considered a leading indicator of overall economic activity in the U.S. It provides valuable insights for business decision-makers, analysts, and investors regarding future economic conditions. 
• Calculation: The PMI is calculated using the following formula:

Importance of PMI

• Business decision-making: Corporate managers use PMI data to make informed decisions about production, inventory management, and staffing levels based on anticipated demand. 
• Investment insights: Investors monitor PMI trends as they often precede changes in major economic indicators such as GDP, industrial production, and employment.