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UAE business outlook stays robust on 4-year high demand level

Sharply rising new order intakes support marked increase in activity

Published: Sun 5 Nov 2023, 4:06 PM

Updated: Sun 5 Nov 2023, 5:39 PM

By
Issac John

A worker bottles perfumes at a factory in Dubai. A considerable uplift in new business intakes supported a robust increase in activity across the non-oil sector in October. — File photo

Business optimism remains robust in the UAE as the non-oil sector recorded a four-year high demand levels in October, the latest PMI survey data shows.

Confidence in the 12-month outlook remains elevated on sharply rising new order intakes supporting a marked increase in activity, as well as further additions to purchasing and staffing levels, S&P’s survey report said.

“At the same time, rising fuel and material prices underlined a sharp increase in business costs in October, as inflationary pressures accelerated to a 15-month high. With this in mind, firms raised their own selling prices for the first time in a year-and-a-half, albeit only fractionally as discounting efforts remained wide,” it said.

The seasonally adjusted S&P Global UAE Purchasing Managers – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – was up from 56.7 in September to the highest level at 57.7 since June 2019, indicating a robust improvement in the health of the sector.

“Overall, new business rose markedly, as surveyed firms highlighted strengthening demand conditions bringing new clients and increased project work,” the PMI report said. The upturn in new orders was strong both domestically and overseas, with foreign new orders also growing at the fastest rate for more than four years.

Abdulla bin Touq Al Marri, the Minister of Economy, said the UAE’s gross domestic product grew 3.7 per cent in the first half of the year as non-oil sector growth vastly outperformed overall growth. Non-oil growth surged 5.9 per cent in the first six months of the year.

“The UAE's economic growth is a testament to our resilience, diversification and commitment to openness, and international cooperation,” he said, adding the country was becoming less reliant on oil and more dependent on knowledge-based industries,” said Al Marri.

"Strong economic conditions in the non-oil sector extended into the final quarter of the year, as October PMI results signalled a new recent record for new business growth. Rising at the fastest rate since June 2019, new order volumes provided additional support to output which continued to rise markedly,” said David Owen, senior economist at S&P Global Market Intelligence.

He noted that high business confidence levels suggest that firms do not expect this momentum to lose steam, as predictions for the year ahead were the second-strongest since March 2020. "There were some indications that inflationary pressures are picking up and starting to influence company's pricing strategies. Overall cost burdens rose at the fastest rate for five months, leading to an increase in output prices. After dropping to a recent low of 1.0 per cent in July, headline inflation could therefore pick back up in forthcoming readings," said Owen.

The report noted that a considerable uplift in new business intakes supported a robust increase in activity across the non-oil sector in October. “The rate of expansion ticked up slightly to the strongest since June, helped by a further rise in employment levels and the clearing of backlogs. After softening to a 14-month low in September, there was a notable boost to inventory growth at the start of the fourth quarter,” it said.