The UAE’s non-oil private sector witnessed an accelerated expansion in business activity in December amid robust demand conditions and a sharp increase in output.
The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) rose for the third successive month in December, from 54.2 in November to 55.4, hitting its highest level in nine months.
The Dubai PMI rose from 53.9 in November to 55.5 in December, also signaling the strongest growth of operating conditions in nine months.
“The UAE saw its best expansion in non-oil business conditions for nine months in December, with the latest PMI data closing out another year of continuous growth and putting the sector in a strong position for 2025,” stated David Owen, senior economist at S&P Global Market Intelligence.
Year-end market conditions spur expansion
The UAE’s non-oil private sector saw buoyant market conditions at the end of the year, which helped firms secure new clients and larger order book volumes. Notably, the overall rise in new work was the sharpest recorded for nine months, despite a softer upturn in sales to international clients.
Consequently, businesses expanded output to the greatest extent since April 2024. Higher demand, projects in progress, discounted prices and favorable weather conditions were all supportive of business activity, according to qualitative reports.
However, backlogs accumulated at a rapid pace in December due to limitations in staff recruitment. Employment rose at one of the slowest rates in over two-and-a-half years, which the PMI survey attributed to margin pressures. This resulted in the volume of outstanding work increasing at one of the fastest rates in the survey’s history.
“Recruitment appears to be the limiting factor – the pace of employment growth was barely changed from November’s 31-month low. While margin constraints appear to be holding some firms back from recruiting more staff, as charges fell despite rising costs, there is certainly a need to boost resources to ensure firms capitalize on demand in the new year,” added Owen.
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Price pressures ease further
The UAE’s non-oil private sector also witnessed the pace of input price inflation slowing for the fourth time in five months in December, dropping below the long-run trend. Although firms noted cost increases in raw materials, shipping, foodstuff and technology, overall purchase prices rose at the weakest pace since April 2024.
“Purchasing growth also quickened to a 13-month high, which could help to lift inventories after a subdued trend in the second half of 2024,” he added.
Wage pressures picked up but were modest. Meanwhile, average prices charged fell for the third consecutive month in December, with discounting widely associated with strong competition and efforts to support growth. The drop in charges was, however, the slowest in this period.
Companies in the UAE’s non-oil private sector expressed optimism towards 2025’s outlook in December but their level of confidence declined for the second month in a row. Optimism was at its second-lowest since early 2023.
