Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
The UAE’s non-oil private sector remained firmly in expansionary mode in October, with the seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) standing at 54.8, slightly below the 55.3 recorded in September.
The S&P Global PMI report noted that new order growth accelerated and output continued to rise strongly, while business confidence improved to its highest level since January.
The PMI is a key indicator of business conditions in the non-oil private sector. A reading above 50 signals an overall improvement from the previous month, while a reading below 50 indicates a deterioration.
“Expansions in output, new orders and stocks of purchases contributed to the sustained growth trend, offsetting the impacts of lower employment and looser supply-chain conditions,” the report noted.
Output growth remained strong at the start of the fourth quarter, easing only marginally from September’s seven-month high. Higher activity was reported across several sectors, including construction, retail, tourism and manufacturing, although some firms cited constraints arising from regional conflict, competition and lower discretionary spending.
New orders rose at a faster pace than in September, supported by new customers and repeat business. Companies attributed the stronger demand partly to an increase in foreign orders, with new export business expanding at the quickest rate in exactly two years.
Selling prices rose at the fastest pace since the survey began in August 2009, as companies passed on higher operating costs to customers and sought to protect profit margins.
Input price inflation accelerated to its highest level since June 2022, driven mainly by rising purchasing costs. Firms reported paying more for raw materials, fuel, energy, freight, maintenance, storage and rent.
Employment declined marginally in October, marking the third reduction in the past five months, as some firms sought to control costs. Consequently, backlogs of work increased sharply as new orders outpaced companies’ ability to complete existing projects.
Purchasing activity recorded its strongest increase in nine months as firms responded to rising demand. However, stocks of inputs grew only marginally, as purchased materials were often used quickly to fulfil orders.
The report also highlighted a growing preference among UAE non-oil businesses for local suppliers to mitigate disruptions to maritime shipping routes.
Business optimism strengthened in October, with expectations for activity over the coming year rising to their highest level since January. Firms attributed their improved outlook mainly to robust demand forecasts and hopes of better regional conditions.
Commenting on the findings, David Owen, Principal Economist at S&P Global Market Intelligence, said non-oil businesses were becoming more optimistic about the year ahead.
The improvement in expectations was “underpinned by robust demand forecasts and hopes that improving regional conditions will lift sectors such as tourism,” Owen said.
He also highlighted improvements in supply conditions as businesses increasingly turned to local suppliers.
“The sharpest rise in purchasing activity for nine months should help businesses keep pace with growing order books heading into the end of the year,” Owen added.
Dubai PMI
The Dubai PMI rose to an eight-month high of 54.6 in October from 54.5 in September, signalling a strong improvement in business conditions among the emirate’s non-oil companies.
New business volumes increased sharply, at a pace that was the joint-fastest since February, prompting companies to expand output.
As was the case across the UAE, Dubai’s non-oil businesses reported a record increase in selling prices, with companies passing higher input costs on to customers.
Dubai firms also expressed greater confidence in future business activity, although cost considerations limited inventory accumulation compared with September.
