Non-Oil Sector Business Activity in UAE Expands Due to Growth in Demand
Inventory growth surged, adding pressure on supply chains
Non-oil business activity in the UAE expanded at a slower rate in November compared to the previous month, as new export business growth softened and dampened sales growth, according to a survey released on Wednesday. The seasonally adjusted S&P Global UAE Purchasing Managers’ Index decreased slightly to 57 in November from 57.7 in October. However, the index remained comfortably above the threshold mark of 50.0, which indicates expansion in activity.
The survey revealed that firms experienced a significant increase in new business inflows, driving inventory growth levels to a near six-year high. This surge in inventory placed pressure on supply chains and material prices. While overall cost inflation remained stronger than recent trends, selling prices remained largely stable.
The strong run of demand growth in the UAE non-oil economy sparked a rapid increase in input buying during November, as firms looked to ensure they were in a good position to take advantage of growth opportunities. Indeed, the uplift in buying – the fastest since July 2019 – supported the most rapid build-up of stocks in close to six years, benefitting both local businesses and trade partners, said David Owen, senior economist at S&P Global Market Intelligence.
Although total sales expanded at one of the fastest rates seen in close to four-and-a-half years, the pace slowed down significantly compared to October. Some firms cited increased competitive pressures and a softer rise in new export business as factors contributing to the slower growth.
While output levels showed growth during November, the volume of unfinished orders increased after October data indicated the first decrease in 28 months.
Input purchasing saw rapid expansion as firms aimed to maintain robust stock volumes amid strong demand. Firms also experienced a solid rise in purchase prices, which was the second-quickest since mid-2022, despite a slight softening from October.
Looking ahead, firms expected activity levels to remain high, but their confidence levels dropped. Some survey participants expressed concerns about increased competition eroding market share. Consequently, staffing growth remained relatively mild, and salaries saw only slight increases.
(Despite this) businesses were much less upbeat about the future path of activity, as some survey panellists reiterated concerns that a large number of firms are entering the market. The build-up of competition was likely a key factor behind stock-building efforts, with businesses wary of falling behind in a fast-growing economy, said Owen.
The survey indicates that the non-oil sector business activity in the UAE continues to expand due to sustained growth in demand. However, the slower rate of expansion in November, coupled with concerns about increasing competition, has led to some caution among businesses. As the UAE economy adapts to dynamic market conditions, it remains to be seen how these factors will shape future growth and competitiveness in the non-oil sector.
(Content by OpenAI, with minor edits)
