The UAE signaled a strong upturn in business activity across its non-oil private sector during April. However, this expansion came with challenges, notably a slowdown in new orders due to heavy rainfall, which disrupted operations and impacted sales. Despite these obstacles, the sector remained resilient, buoyed by competitive pricing strategies and optimistic outlooks for future growth.
The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) declined from 56.9 in March to 55.3 in April. However, it remained above the 50.0 no-change mark which maintained the positive trend the UAE’s non-oil sector has been witnessing since December 2020. Similarly, the S&P Global Dubai PMI posted 55.1 in April, down from 58.0 in March, the lowest for eight months. This was due to a sharp slowdown in new business growth.
“April data highlighted strong overall growth across the UAE non-oil private sector as buoyant domestic economic conditions helped to support long-term business expansion plans,” stated Tim Moore, economics director at S&P Global Market Intelligence.
Weather conditions impact business activity
Heavy rainfall in April led to disruptions in business operations across the UAE and contributed to a slowdown in new order growth in the non-oil sector, marking the slowest pace since February. The adverse weather conditions also resulted in a sharp rise in backlogs of work, underscoring the challenges businesses faced in the state.
“Companies operating in Dubai recorded a particularly acute loss of sales momentum as adverse weather disruptions hit business and consumer spending,” added Moore.
Despite challenges, non-oil private sector firms in the UAE indicated sustained growth in staffing numbers, extending the current period of job creation to two years. However, the rate of employment growth was modest, with reports of margin pressures acting as a constraint on hiring.
Price and cost dynamics
April’s PMI data signaled faster rises in both purchasing prices and staff costs. The report attributes the increases to rising raw material prices and efforts to compensate employees for higher living costs. Concurrently, average prices charged decreased again, reflecting competitive market conditions and efforts to stimulate sales.
While purchasing activity rose robustly across the UAE’s non-oil private sector, inventory strategies were cautious, with stocks of purchases increasing at the slowest pace since March 2022. Supplier performance improved, albeit to the least extent since December 2022, partly due to transportation disruptions in April. However, demand for inputs remained strong in April.
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Future outlook
Despite challenges, optimism regarding prospects for business activity growth remained upbeat in April despite softening to a three-month low. Survey respondents noted buoyant market conditions, strong sales pipelines, and swift recovery from weather disruptions as factors contributing to the non-oil sector’s growth in the UAE.
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