Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
The non-oil private sector of the UAE’s economy saw robust expansion in December with the seasonally-adjusted S&P Global UAE Purchasing Managers’ Index (PMI) reaching 55.4 from 54.2 in November.
The PMI rose for third successive month in a row and is at the highest level in nine months.
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 PMI points to an accelerated expansion in the non-oil private sector economy. Robust demand conditions spurred the quickest increase in new business for nine months, which also drove a sharper increase in output,” the S&P Global said.
Analysing the PMI data, the S&P Global said: “Buoyant market conditions at the end of the year helped businesses to secure new clients and larger order book volumes. The overall rise in new work was the sharpest for nine months, despite a less pronounced increase in sales to international clients.”
Businesses expanded output to the greatest degree since April 2024. “Higher demand, projects in progress, discounted prices and favourable weather conditions were all supportive of business activity,” the S&P Global said.
The S&P Global took note of another positive development on input costs. It said the pace of input price inflation slowed for the fourth time in five months and dropped below the long-run trend. “Although cost rises were noted in relation to raw materials, shipping, foodstuff and technology, overall purchase prices rose at the weakest pace since April 2024,” the report said.
Commenting on the latest PMI, David Owen, Senior Economist at S&P Global Market Intelligence, said: "The UAE saw its best expansion in non-oil business conditions for nine months in December, with the latest PMI data closing out another year of continuous growth and putting the sector in a strong position for 2025.”
The slowdown in staff recruitment appears to be hindering companies' ability to meet the growing backlog of work. Margin pressures are also limiting their ability to expand their workforce. “There is certainly a need to boost resources to ensure firms capitalise on demand in the new year,” Owen said.
Dubai PMI
The Dubai PMI saw a steep rise to 55.5 in December, up from 53.9 in November.
Businesses reported faster expansions in output and new orders following increased client demand. Rates of growth were stronger than those observed at the UAE level, the S&P Global survey report said. “Elevated new business growth encouraged a renewed (albeit mild) rise in employment,” the report said.
In contrast, inventories of inputs declined for the second month in a row. Output charges started to rise following reductions in both October and November.
Reacting to the strong positive PMI report, Samer Mardini, Chief Investment Officer at Yorklyn Asset Management in Dubai, said: “UAE's non-oil sector showing such strong growth is a clear reflection of successful economic diversification efforts. The sharp rise in new orders and business activity signals a healthy, resilient economy poised for further expansion.”
Latest PMI data is a reminder of the UAE's growing strength in domestic markets. “This momentum offers a unique opportunity for businesses to innovate and scale, while investors should view this as a solid indicator of stability and potential long-term returns,” Mardini said.
Strong growth indicators point to the possibility of more sustainable and localised growth in the future, Mardini added.
