Robust Market Demand Drives Expansion
Non-oil private sector in the UAE, as indicated by a business survey released on Monday, recorded the fastest growth in nine months of December, spurred by strong demand conditions.
The seasonally adjusted S&P Global UAE Purchasing Managers’ Index reached 55.4 in December, versus 54.2 recorded in November. This marked the third straight month of gains, and such a reading above 50 denotes expansion. Therefore, the new number reflects an ongoing strong growth of business activities.
The respondents of the survey attributed the growth to buoyant market conditions, which helped businesses secure new clients and expand their order books. The overall increase in new work reached its sharpest pace in nine months, despite a modest upturn in sales to international clients. The survey noted that higher demand, ongoing projects, discounted prices, and favorable weather conditions contributed to the positive performance.
PC: Reuters
Slower Growth in Employment
Although the business activity index increased, employment levels increased at one of the weakest rates over the past two-and-a-half years. This was partly related to margin pressures experienced by companies.
“Capacity levels remain under considerable stress, illustrated by another marked increase in backlogs of work,” said David Owen, Senior Economist at S&P Global Market Intelligence. “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, there is certainly a need to boost resources to ensure firms capitalize on demand in the new year.”
And even as costs rise, businesses cut charges, pinning down margin constraints.
Optimism for 2024
In looking ahead, the firms remained positive about the year ahead but their confidence dropped for the second successive month. Their optimism level hit its second-lowest since the beginning of 2023.
Dubai Performs Stronger
Dubai’s non-oil private sector outperformed the broader UAE market, with its PMI rising to 55.5 in December from 53.9 in November. This marks the city’s strongest growth in operating conditions in nine months.
Dubai growth was mainly boosted by higher output and new orders expansions since the businesses experienced higher client demand and a busy market. In both output and new orders, Dubai recorded a faster expansion rate than the overall UAE growth rate.
However, Dubai-based firms are showing weaker optimism regarding 2025, as the confidence level now falls to a low since May 2021. Only 6% of the respondents in Dubai expect output growth in the next year.
All things considered, however, the non-oil private sector of the UAE, along with Dubai specifically, ended 2024 on a strong note while facing bottlenecks such as recruitment challenges and margin pressures to stay in the same growth path moving into 2025.
