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UAE non-oil activity grows fastest since October
S&P Global PMI shows index ticks up to 54.3 in February
UAE’s non-oil activity gained pace in February, marking the strongest growth since last October, data showed on Friday.
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 – ticked up slightly to 54.3 in February.
Business expectations strengthened and supply chains performed well despite robust demand for inputs, with lead times improving at the fastest pace in almost three-and-a-half years. “The latest reading signalled a robust improvement in the health of the sector, and one that was broadly in line with the series long-run trend (54.2),” the report said.
David Owen, senior economist at S&P Global Market Intelligence. - KT file
David Owen, senior economist at S&P Global Market Intelligence, said: “The chief upside to the index was a faster rate of output growth, which accelerated for the first time in four months. Expectations towards future activity also picked up to a four-month high. However, while the sharp rise in output was largely attributed by firms to underlying demand strength, the latest upturn in new business was the slowest seen for 17 months, suggesting the improved growth picture may be short-lived.”
On the upside was a sharp acceleration in the rate of output growth, which picked up for the first time in four months and to the highest level in that same period. Notably, over a quarter of survey respondents indicated that their output had increased since January, often attributing this to new projects and rising client sales.
While new order volumes rose sharply in February, the rate of expansion softened slightly since the beginning of the year and was the weakest since September 2021. A number of firms saw demand levels improve, but others noted that strong competition and weaker exports had weighed on growth, data showed.
New foreign orders fell for the third straight month, although the latest fall was only marginal. The headline PMI was slightly offset by the Suppliers’ Delivery Times Index, which pointed to the sharpest reduction in lead times since September 2019 as supply chain conditions improved.
Supply chain conditions strengthened in February, shown by a marked reduction in delivery times that was the fastest since September 2019. However, a concurrent and sharp rise in purchasing activity contributed to a renewed increase in purchase prices, putting increased pressure on firms’ cost levels,” Owen said.
Employment numbers picked up marginally in February, with staff hires usually linked by panellists to new project work. Despite this, backlog volumes rose only modestly and to the least extent in 20 months, in line with the slowdown in sales growth.
The upshift in the headline index masked competing movements in some of the PMI sub-components in February, particularly output, new orders and suppliers’ delivery times. As a result, firms raised their input purchases at a sharp and notably quicker pace — the upswing in the index was the largest on record — in order to bolster output and plan for future work.
Rising input demand contributed to a renewed rise in purchase prices, which had seen little change over the prior two months. The uplift was modest, but the sharpest since July 2022. In addition to reports of higher raw material prices, some firms noted that shipment fees had risen. The increase led to an uptick in firms’ overall input costs for the first time since last November.
Output charge discounting continued into February, although there was some evidence of companies passing on higher costs to clients. The rate of decrease in selling prices was the slowest for three months and only mild.
Looking ahead, non-oil firms signalled a stronger degree of confidence for the next 12 months in February, the highest since last October. Optimism remained subdued by historical standards and below the 2022 average, however.
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