Today's Edition
A.SREENIVASA REDDY (ABU DHABI)
The non-oil private sector of the UAE's economy continued to show solid expansion in November with the seasonally adjusted S&P Global UAE Purchasing Managers' Index (PMI) reaching 54.2, from 54.1 in October.
The PMI is a widely used economic indicator that measures the health of the manufacturing and service sectors. It is derived from monthly surveys of purchasing managers in the private sector, focusing on metrics like production, new orders, employment, supplier delivery times, and inventory levels. A PMI reading above 50 signifies expansion in business activity compared to the previous month, while a reading below 50 indicates contraction. PMI is crucial for policymakers, investors, and analysts as it provides early insights into economic trends.
"Strong demand conditions and competitive client pricing supported a faster increase in new business, which in turn drove another robust uplift in business activity," the S&P Global said.
Analysing the PMI data, S&P Global said: "Despite softening from the previous month, the pace of output growth was slightly quicker than the historical trend, with nearly a quarter of survey respondents reporting an expansion in activity since the previous month."
The S&P Global report said the uplift in new orders was the sharpest since August. "Qualitative evidence from businesses showed that successful client wins, new marketing initiatives and price discounts supported sales," the report said.
The S&P Global, striking a note of caution, said the survey data continued to signal a relatively muted jobs market in the non-oil sector. "Employment rose only fractionally and to the least extent for 31 months, with nearly all panellists (99%) reporting no change in their staffing," it added.
The subdued job situation continues despite growing order book volumes leading to delays in the completion of orders. "Nearly a fifth of surveyed firms reported an expansion in pending workloads since October," the S&P Global said.
Prospects of subdued future growth hindered capacity levels. "Output expectations were only slightly better than September's 18-month low. Firms were reluctant to boost input stocks," the report said. Firms however signalled a solid improvement in supplier delivery times, which contributed to a slight increase in the overall inventories
"The UAE PMI was consistent with a solid rate of growth across the non-oil private sector in November. Businesses continued to see a marked upturn in sales, which spurred activity forward and greatly added to outstanding work," said David Owen, Senior Economist at S&P Global Market Intelligence.
Owen, referring to the muted job situation despite good PMI number, said: "Despite the positive headline figure, the survey data signalled a degree of uncertainty among firms about how long this strength will last."
The rate of input price inflation was the same as in October. The cost pressures mainly stemmed from increased material, technology, fuel, machinery and maintenance prices, the report said.
Despite higher costs, non-oil businesses opted to reduce their selling charges, carrying on a renewed period of discounting from October. A desire to offer more competitive prices frequently drove firms to lower their fees, although the overall pace of decline was modest, the PMI report said.
Commenting on the latest PMI report, Vijay Valecha, Chief Investment Officer at Cenurty Financial, said: "The UAE's aggressive action plan to diversify its economy away from oil seems to be immensely successful, as indicated in the latest PMI survey data. The UAE's attractive position as a business hub, driven by strong consumer demand and increased spending, has led to the expansion of new business activity."
Expressing optimism on the job growth, Valecha said: "The recorded growth could only mean that job hiring is likely to bounce back in the near term, as the underlying fundamentals are still strong."
Dubai PMI
The Dubai PMI climbed to 53.9 in November, up from 53.2 in October but below the UAE PMI (54.2).
"Driving stronger operating conditions across Dubai was a marked increase in new order inflows, which was the fastest since August and stronger than seen nationwide," the S&P Global report said.
The report noted that employment levels nonetheless dropped for the first time since April 2022, albeit fractionally. The reduction came as output expectations slipped to a 23-month low, and margins were further squeezed by rising purchase prices. "Output charges fell for the second straight month despite a sharp uplift in input costs," the report said.
