UAE – Mubasher: Business activity in the UAE surged at its quickest pace in nearly five years in February 2024 amidst robust growth across the non-oil sector, with businesses experiencing strengthened conditions driven by significant increases in activity and sales.
The seasonally adjusted S&P Global UAE Purchasing Managers' Index (PMI) climbed from 56.6 in January to 57.1 in February, indicating a sharp upturn in overall operating conditions, according to a report by S&P Global.
This trend, which commenced in the final quarter of the previous year, marked the strongest performance since mid-2019, primarily driven by a sharp expansion in non-oil private sector activity.
S&P Global’s report highlighted a notable uptick in new orders as market demand and client activity maintained upward trajectories, resulting in the sharpest rise in output levels since mid-2019.
Despite competitive pressures persisting, businesses managed to sustain growth momentum. However, disruptions to shipping lines in the Red Sea began impacting local supply chains, leading to a moderate improvement in vendor performance over seven months and a notable increase in backlogged work, the sharpest in nearly four years.
Furthermore, input prices rose solidly for the second consecutive month. Nevertheless, firms, in a bid to outpace competitors, offered the most significant price cuts since September 2020.
February saw a remarkable rise in new business inflows, although the growth rate slightly softened to a six-month low. While client orders generally increased, businesses noted the impact of competitive pressures on growth.
Despite another solid increase in overall input costs, businesses felt compelled to implement significant price cuts, the most substantial recorded in nearly three-and-a-half years, to retain market share amid rising material prices and wages.
Supply chain challenges from the Red Sea led to delays in input deliveries, resulting in a sharp accumulation of outstanding work. Nonetheless, supplier performance remained positive overall.
To manage growing workloads and offset backlog growth, hiring activity accelerated, resulting in the fastest expansion of employment levels since May of the previous year. Input purchases continued to rise sharply as firms replenished their stocks.
Looking ahead, business expectations reached a four-month high, with firms anticipating further strengthening in activity, demand, and profits in the future.
David Owen, Senior Economist at S&P Global Market Intelligence, commented: “Business expectations suggest that companies are positive about the year ahead, although concerns of a crowded market remain and appeared to dampen sales growth further. New orders rose at their softest rate for six months, suggesting output growth could also begin to slow."
The UAE’s seasonally adjusted PMI recorded 56.6 in January 2024, lower than 57.4 in December 2023.
