Last month’s Dubai PMI suggested that business conditions across the non-oil private sector were expanding steadily.
The UAE’s non-oil sector witnessed a sharp rise in new business levels last month, following reports of solid growth in export sales and solid conditions in the local market. However, the pace of expansion has slowed to the second lowest level in the past year and a half.
In the UAE’s non-oil sector, growth in non-oil business activity was the weakest in three years at the end of the third quarter of 2024. The slowdown in growth was accompanied by slower growth in new orders and slower job creation.
The S&P Global UAE Purchasing Managers’ Index (PMI) for September was a seasonally adjusted 53.8, down from 54.2 in August. Although the reading remained well above the 50.0 mark that separates growth from contraction, the index was above July’s 53.7, the second lowest level in three years.
Prices continue to soar
Companies in the UAE’s non-oil sector continued to raise prices in September as transport, petrol, technology and maintenance costs were commonly reported sources of inflationary pressures, with further cost spikes.
PMI data for September showed the pace of increase in average prices across the non-oil economy is accelerating, marking the fifth straight month of inflation after a discount period. The increase was the largest since early 2018, and companies attributed it to higher selling and purchasing prices, according to the report.
Despite the rise in average prices, the UAE’s overall cost inflation rate has slowed to its lowest level since April.
“Competition also remains a challenging area, and panelists reported that the challenging market environment makes their outlook for next year more cautious,” said David Owen, senior economist at S&P Global Market Intelligence. It is currently at its lowest level since early 2023.” .
Activity growth slows down
Despite strong growth, overall non-oil economy activity and new business growth slowed at the end of the third quarter. Business activity grew at the slowest pace since September 2021, despite widespread reports from companies that rising demand had boosted production. Companies reported fewer jobs in September as growth in new orders slowed, giving total payrolls the slowest increase since the end of 2022.
“Survey data also suggests that companies are choosing to maximize profits while sales remain strong, as output charges rose at the fastest pace in more than six-and-a-half years. “This was partly due to continued strong cost pressures in September, but there has been some easing on this front compared to previous months, which may be a sign that inflation trends are weakening,” Owen added.
The report also noted an expansion in the UAE non-oil sector’s sales pipeline in September, with research data pointing to a significant increase in backlog. A significant backlog has accumulated since February and increased further last month to a four-month high.
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Dubai’s economic activity surges
While the UAE’s non-oil sector is slowing down, September’s Dubai PMI suggested that business conditions in the non-oil private sector as a whole are expanding strongly. Overall activity levels rose at the fastest pace in four months, even as the pace of new business volume growth slowed. Supplier performance also improved, but to a lesser extent due to reported customs delays.
On the price front, the report revealed that overall input costs rose sharply during September. However, the inflation rate has slowed to a five-month low.
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