Driven by a sharp rise in new business activities on the back of healthy demand conditions, the UAE’s non-oil private sector economy sustained the vibrancy in November.
Businesses continued to build input stocks in efforts to rapidly replenish and build stocks driving the Purchasing Manager Index to 57.0 in November, after posting its highest reading in over four years in October (57.7).
While new orders remained well inside growth territory, increased demand, new clients, project inquiries and marketing efforts underpinned vibrancy, according to S&P Global’s PMI report.
David Owen, senior economist at S&P Global Market Intelligence, said the strong run of demand growth in the UAE non-oil economy sparked a rapid increase in input buying during November as firms looked to ensure they were in a good position to take advantage of growth opportunities.
“Indeed, the uplift in buying – the fastest since July 2019 – supported the most rapid build-up of stocks in close to six years, benefiting both local businesses and trade partners. Despite this, businesses were much less upbeat about the future path of activity, as some survey panellists reiterated concerns that a large number of firms are entering the market,” said Owen.
The build-up of competition was likely a key factor behind stock-building efforts, with businesses wary of falling behind in a fast-growing economy, the S&P economist said.
The International Monetary Fund has forecast that the UAE’s real GDP will grow by 3.4 per cent in 2023 and 4.0 per cent in 2024 — a projection in line with the World Bank’s estimate. The IMF expects that the UAE’s current account balance to be about 8.2 per cent of GDP in 2023 and 7.7 per cent of GDP in 2024.
Similar forecasts for the UAE economy in 2024 paint an upbeat picture. Real estate and construction sectors should extend their momentum through to the next year, while retail, tech and other categories too are primed for growth, according to economists.
In the first half of 2023, the UAE’s GDP grew 3.7 per cent in the first as non-oil sector growth vastly outperformed overall growth. Non-oil growth surged 5.9 per cent in the first six months of the year.
The S&P PMI signalled that operating conditions improved rapidly midway through the final quarter, supported by strong trends for new business, output and inventories.
“The upturn culminated in the greatest expansion of inventory levels for close to six years, placing some pressure on supply chains and material prices. Overall cost inflation remained stronger than recent trends, but selling prices were largely stable,” the PMI survey report said.
The S&P panelists noted that although the expansion in total sales was one of the fastest seen in close to four-and-a-half years, it slowed markedly from October, with some firms noting greater competitive pressures and a softer rise in new export business.
“While non-oil businesses expect activity levels to remain on an upwards trajectory, the latest data pointed to a clear drop in confidence levels. This was mainly due to concerns at some companies that competitive pressures could erode market share. With this in mind, staffing growth stayed relatively mild, while salaries also ticked up only slightly,” the report added.