Recent data indicates that new order inflows in Dubai experienced the fastest growth in November since August. The UAE's non-oil economy maintained a robust expansion rate in November, as highlighted by the latest PMI survey data. Strong demand conditions and competitive pricing strategies contributed to a faster increase in new business, which subsequently fueled a significant rise in business activity.
The seasonally adjusted S&P Global UAE Purchasing Managers' Index (PMI)—a composite indicator designed to provide an accurate overview of operating conditions in the non-oil private sector economy—stood at 54.2 in November, slightly higher than October's 54.1. This index remained well above the 50.0 no-change threshold, signaling a strong improvement in the non-oil economy's health.
Dubai's PMI rose to 53.9 in November, up from 53.2 in October but slightly below the UAE PMI. The improved operating conditions in Dubai were largely driven by a notable increase in new order inflows, which grew at the fastest pace since August and outperformed the national average. Anecdotal evidence suggests that lower prices often aided client sales, leading to another robust increase in business activity.
However, employment levels declined for the first time since April 2022, albeit marginally. This reduction coincided with output expectations reaching a 23-month low and margins being further squeezed by rising purchase prices. Additionally, inventories were reduced for the first time since July. Despite a sharp increase in input costs, output charges fell for the second consecutive month.
David Owen, Senior Economist at S&P Global Market Intelligence, commented: “The UAE PMI reflects a solid rate of growth across the non-oil private sector in November. Businesses continued to experience a marked upturn in sales, which boosted activity but also significantly increased outstanding work. Employment growth hit a 31-month low, while input purchases rose at the slowest pace since July 2023. Despite the positive headline figure, the survey data indicates a degree of uncertainty among firms about the sustainability of this strength. Confidence in future business activity was relatively subdued—the second-lowest since early last year—and there were further mentions from panellists that markets are becoming crowded, limiting pricing power.”
Despite subdued job creation and limited efforts to store extra inputs, capacity pressures at non-oil firms remained elevated in November. Meanwhile, businesses continued to reduce charges despite a solid increase in costs. However, the rate of growth remained slower than earlier in the year, according to S&P Global.
The survey data indicated a sharp expansion in total business activity during November. Although softening from the previous month, the pace of output growth was slightly quicker than the historical trend, with nearly a quarter of survey respondents reporting an expansion in activity since the previous month. Higher output was often associated with a strong market environment, which also supported a marked increase in new order volumes. Notably, the uplift in new orders was the sharpest since August. Qualitative evidence from businesses showed that successful client wins, new marketing initiatives, and price discounts supported sales.
Despite this, the survey data continued to signal a relatively muted jobs market in the non-oil sector. Employment rose only fractionally and to the least extent for 31 months, with nearly all panellists (99%) reporting no change in their staffing. This came despite another substantial rise in backlogs of work, as growing order book volumes often led to delays in the completion of orders. Nearly a fifth of surveyed firms reported an expansion in pending workloads since October.
Capacity levels were also hindered by a fairly subdued assessment of future activity growth. Output expectations were only slightly better than September’s 18-month low. With this in mind, firms were reluctant to boost input stocks, with new purchases mostly consumed by current output requirements. Firms indicated a solid improvement in supplier delivery times, which contributed to a slight increase in overall inventories.
The rate of input price inflation held at October’s six-month low in the latest survey period. Nevertheless, this still represented a solid increase in costs that was also slightly quicker than the long-run trend. Survey evidence showed that cost pressures mainly stemmed from increased material, technology, fuel, machinery, and maintenance prices. Despite higher costs, non-oil businesses opted to reduce their selling charges, continuing a renewed period of discounting from October. A desire to offer more competitive prices frequently drove firms to lower their fees, although the overall pace of decline was modest.
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