Mustafa Abdel Azim (Dubai)
The non-oil private sector in the UAE continued its recovery momentum at the beginning of the second quarter of 2024, with commercial activity continuing to expand at a strong pace last April, benefiting from the strength of local economic conditions, and the fruits of long-term business expansion plans, in addition to competitive pricing strategies. According to data from the UAE Purchasing Managers’ Index issued by Standard & Poor’s Global.
Companies participating in the study again commented on the intensity of competition for new business, which led to average prices for products and services falling for the sixth month in a row in April. Reports indicated price reductions despite moderate increases in procurement costs and employee salaries.
Standard & Poor’s Global’s key seasonally adjusted Purchasing Managers’ Index (PMI) for the UAE – a composite index designed to give an accurate overview of operating conditions in the non-oil private sector economy – recorded a decline from 56.9 points in March to 55.3 points in April, which is A reading above the neutral level (50.0 points) indicates a continuation of the positive trend that has been ongoing since December 2020.
Business activity continued to expand at a strong pace in April, and companies participating in the study cited strong local economic conditions, the fruits of long-term business expansion plans, and competitive pricing strategies.
April data indicated that new orders continued to rise, but at a slower pace, due to the impact of the heavy rain wave that disrupted commercial operations, affected sales, and contributed to the sharp rise in backlogs.
Non-oil private sector companies indicated a continuous increase in the number of employees, thus extending the current period of job creation to two years.
April data indicated an acceleration in the increase in purchasing prices and hiring costs. Participating companies commented on the high prices of raw materials and efforts to compensate employees for the high cost of living.
Meanwhile, average prices for products and services fell again in April, albeit at the slowest pace so far in 2024. The price reductions are due to competitive market conditions and efforts to stimulate sales.
The strong demand for production inputs continued in April, as evidenced by the strong and accelerating rise in purchasing activity across the non-oil private sector economy. However, inventory increase strategies were more cautious, with purchasing inventories rising at the slowest pace since March 2022. Meanwhile, supplier performance improved at the slowest rate since December 2022, partly due to transportation disruptions in April.
Optimism about the outlook for business activity growth next year remained very strong in April, despite falling to a three-month low.
The majority of companies participating in the study cited buoyant market conditions and strong sales, in addition to a rapid recovery from weather-related business disruptions.
Tim Moore, Director of Economics at Standard & Poor’s Global Market Intelligence, said that the April data highlighted the strong overall growth in the non-oil private sector in the UAE, as the thriving local economic conditions helped support long-term business expansion plans. However, the latest study pointed to a sharp slowdown in new business following heavy rains and weather disturbances that affected business and consumer spending. Backlogs increased significantly in April, the result of temporary business disruptions and increased pressure on operational capacity.
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