UAE: New order growth accelerates sharply to over four-year high

The UAE PMI pointed to a much stronger upturn in new business volumes at non-oil companies during September, as new client onboarding, competitive pricing and sturdy underlying economic conditions boosted demand, a report showed on Wednesday.

The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – registered 56.7 in September, rising from 55.0 in August to signal a strong and accelerated expansion in the non-oil private sector.

The 1.7-point increase in the headline index was overwhelming driven by the New Orders sub-index, which climbed over seven points to its highest level since June 2019. This index signalled a considerable upturn in new order inflows over September, with nearly 38 per cent of survey participants noting a monthly rise against 8 per cent which saw a fall. Where new orders grew, a number of businesses noted having more clients, which some in turn linked to stronger economic conditions and lower prices amid competitive pressures.

Output rose more quickly and confidence jumped, while stronger input buying growth drove cost pressures higher. However, expansions in both inventories and employment softened.

Firms indicated that previous hiring and inventory growth had helped them to boost capacity sufficiently, resulting in the weakest rise in backlogs of work in over two years. Subsequently, job creation slowed and was only mild during September.

David Owen, Senior Economist at S&P Global Market Intelligence, said: “The UAE PMI recorded its first uptick for three months in September, driven by a much sharper rise in new work intakes than one month ago. In fact, the upturn in new work was the fastest since June 2019, supported by new client wins both domestically and in export markets. Activity growth likewise quickened, though only mildly, and remained weaker than June’s recent high. This also marked the first time since May 2021 where the Output Index was behind New Orders, suggesting that businesses did not feel the need to boost activity to such a considerable extent. Supporting this, backlogs of work rose at the softest rate in over two years, while both inventory and staff growth slowed, indicating that firms had sufficient capacity to deal with the influx of new orders.”

Demand strength reportedly arose from both domestic and external markets in September. New orders from foreign clients rose at a marked pace that was the sharpest seen in just over four years.

Overall selling prices continued to fall in September, though like that seen in August, the pace of discounting was only modest. While several firms opted to cut their charges in order to promote goods and services and limit the impact of greater competition, some raised their charges due to rising input costs.

“Demand growth meanwhile spurred greater purchasing at non-oil firms in September, which acted to quicken the pace of purchase price inflation. Price discounting at businesses continued, albeit to only a modest degree, suggesting that competition had limited pricing strategies,” Owen said.