UAE's Non-Oil Economy: Growth Deceleration Amidst Strong Demand

UAE's Non-Oil Economy: Growth Deceleration Amidst Strong Demand

By Staff Writer, 07 December 2023

In a recent survey, it has been revealed that non-oil business activity in the UAE experienced a decelerated growth rate in November compared to the previous month.

The S&P Global UAE Purchasing Managers' Index, adjusted for seasonal variations, dipped slightly from 57.7 in October to 57 in November.

Despite this decline, the index remains comfortably above the 50.0 threshold, indicating continued expansion in economic activity.

The survey highlighted that the softer increase in new export business contributed to the moderation in sales growth.

While firms reported a significant surge in new business inflows, leading to a near six-year high in inventory growth levels, this increase has also put pressure on supply chains and material prices.

Overall cost inflation remained robust, but the report noted that selling prices remained largely stable.

According to David Owen, a senior economist at S&P Global Market Intelligence, the strong demand in the UAE's non-oil economy prompted a rapid expansion in input buying during November.

This accelerated buying, the fastest since July 2019, resulted in the most rapid build-up of stocks in nearly six years, benefiting local businesses and trade partners alike.

Despite the fact that total sales expanded at one of the fastest rates in almost four and a half years, the growth slowed significantly from October.

Some firms cited increased competitive pressures and a softer rise in new export business as contributing factors.

Although output levels increased during November, there was a rise in the volume of unfinished orders, reversing the trend observed in October, which marked the first decrease in 28 months.

Input purchasing expanded rapidly as firms aimed to maintain robust stock volumes in response to strong demand.

Purchase prices experienced a solid rise, making it the second-quickest increase since mid-2022, despite softening from October.

Looking ahead, while firms expected activity levels to remain high, there was a notable decline in confidence levels.

This drop was primarily attributed to concerns among some companies that intense competitive pressures could erode their market share.

Consequently, staffing growth remained relatively mild, and salaries saw only a slight increase, according to the report.

David Owen emphasized, "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."

Brinda Darasha / Zawya

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