The UAE witnessed a notable upswing in non-oil sector activity in February, driven by increased new orders and robust market demand. According to the latest findings from the S&P Global UAE Purchasing Managers’ Index (PMI), businesses reported the sharpest rise in output levels since mid-2019, signaling a significant expansion in overall operating conditions. The UAE’s PMI increased from 56.6 in January to 57.1 in February, signaling a sharp upturn in overall operating conditions.
Rapid expansion
The expansion of the UAE’s non-oil private sector activity was the main driver behind the improving operating conditions. The most recent PMI survey reveals that the sector showed the quickest growth since June 2019, with 38 percent of observed companies reporting a month-on-month surge. The PMI survey revealed that increased new business, stronger client activity, and intensified marketing and development efforts were the key drivers behind this growth in UAE’s non-oil activity.
“One of the PMI’s largest components, the Output Index, rose to its highest level since June 2019, pointing to a rapid expansion of business activity as firms look to take full advantage of strong market growth and maintain a competitive edge,” stated David Owen, senior economist at S&P Global Market Intelligence.
Once again, improving demand conditions in the UAE’s non-oil private sector resulted in a noticeable increase in new business inflows during February. Although the growth rate remained higher than the long-term average, it slightly decreased to its lowest point in six months.
In addition, client orders generally showed improvement. However, many firms observed the influence of competitive pressures on their growth. In February, there was a notable increase in price reductions, marking the strongest reduction in nearly three and a half years. Firms emphasized the necessity of retaining market share, often resorting to offering discounts to clients. Despite another significant rise in overall input costs, attributed to increases in material prices and wages, price cuts were still evident.
Shipping disruptions
During February, disruptions to shipping lines in the Red Sea started affecting local supply chains and the UAE’s non-oil sector. Vendor performance showed slight improvement, marking the least improvement in seven months. Meanwhile, backlogged work increased at the fastest rate in nearly four years. Simultaneously, input prices rose steadily for the second consecutive month, yet firms continued to offer price cuts to outdo competitors. Notably, charge discounting reached its highest level since September 2020.
In the UAE’s non-oil sector, businesses experienced supply chain pressure due to shipment challenges stemming from the Red Sea. Some companies faced delays in input deliveries which led to a significant accumulation of pending work. Despite this, overall supplier performance remained positive, with many firms reporting quicker distribution of inputs upon request.
Read: UAE government issues 151 financial sector decisions in 2023
Recruitment drive
To address growing workloads and offset backlog growth, recruiting activity accelerated in the UAE’s non-oil sector in February. Employment levels expanded at the fastest pace since May 2023. Likewise, input purchases continued to grow rapidly due to firms bulk buying materials in an effort to replenish their stocks. Finally, business expectations rose to a four-month high, as firms expect activity, demand, and profits to continue strengthening in the future.
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