Momentum in Dubai’s non-oil private sector economy remained on an upwards trajectory in October, amid surging demand and growing business confidence across the UAE.
According to the latest Purchasing Managers survey data (PMI), new business intakes in Dubai increased at the sharpest rate since June 2019, with the upturn seen widely across key sectors.
The headline S&P Global Dubai PMI rose for the second month in a row in October, ticking up to 57.4 from 56.1 in September. This marked the highest headline reading for the survey since August 2022 and indicates a strong start to the final quarter of the year. Indicative of a sharp improvement in business conditions across the non-oil economy, the reading was also the second-highest since June 2019.
“With the improvement in sales growth providing added confidence to firms about the business outlook, the latest data highlighted a rapid build-up of inventories in October,” said the PMI report. Driving the PMI higher was a faster increase in new business volumes. In fact, the rate of sales growth was the most marked in over four years, as firms frequently reported new clients and improved market demand.
The upturn was also evident across the UAE with business optimism remaining robust as the non-oil sector recorded a four-year high demand levels in October. Confidence in the 12-month outlook for the UAE also remains elevated.
“Demand momentum in the Dubai non-oil economy is on a steamroll in the latter part of the year, with October PMI data signalling that strong market conditions drove the sharpest rise in new business since June 2019. The uplift was steered by accelerations in multiple sectors, adding further confidence that non-oil growth will be robust in the fourth quarter,” said David Owen, senior economist at S&P Global Market Intelligence.
“Dubai recorded real GDP growth of 2.8 per cent year-on-year in Q1 and 3.6 per cent in Q2 and we anticipate that it will have accelerated further through the second half of the year. As in the wider UAE PMI survey released last week (which was at a more-than-four-year high), it was a robust expansion in new orders that drove the pick-up in the headline reading. Sales growth was at the strongest level since June 2019 with respondents to the survey noting new clients and greater demand,” Daniel Richards, senior economist at Emirates NBD, said.
Owen noted that output at non-oil firms rose at a sharp pace accordingly in October, while forward-looking indicators suggest that the expansion could step up further in the months ahead. “This included business activity expectations which climbed to the highest since February 2020, prompting firms to accumulate stocks of purchases rapidly.”
“The only lagging indicator is employment which dropped to a 13-month low and indicated only a marginal rise in staffing during October. The sharp increase in new order volumes suggests that firms will need additional labour in the coming months, although this depends on how much capacity they can build with existing workforces,” said Owen.
The report noted that greater demand for inputs pushed prices higher, as indicated by the fastest rate of cost inflation for 15-months. “On the flip side, staffing levels were raised only slightly as firms signalled having sufficient capacity to boost output levels.”
According to the PMI data, improvements on the demand side supported another sharp rise in business activity across the non-oil private sector economy in October. “The pace of output growth even ticked up to a three-month high. However, firms showed a degree of caution towards hiring, with survey data indicating only a slight rise in employment that was the weakest in just over a year. On the cost front, Dubai non-oil firms registered a solid increase in overall input prices during October, which was also the fastest in 15 months following subdued cost pressures earlier in the year,” said the report.