The UAE’s non-oil private sector saw growth rebound in August, with the S&P Global UAE Purchasing Managers’ Index rising to 54.2 from July’s 53.7. Both output and sales growth strengthened, with the output sub-index reaching 59.1. Despite the expansion, the rate of growth was among the slowest in three years. Businesses remained confident about the future, with optimism increasing for the first time since May.
In 2023, the UAE’s non-oil trade hit a record high of Dh3.5 trillion, reflecting a 12.6% increase in non-oil goods trade and exports exceeding Dh1 trillion. This performance has been attributed to the country’s economic diversification plans, moving towards a knowledge and innovation-based economy. However, firms are cautioned about rising costs, as input prices continued to increase sharply in August, potentially affecting demand.
David Owen, a senior economist at S&P Global Market Intelligence, noted that while business conditions improved in August, they were weaker than earlier in the year. Companies are confident in sustaining output growth in the coming year, fueled by strong sales pipelines. However, rising input prices could dampen demand, adding uncertainty to the growth outlook. In Dubai, the non-oil private sector showed stronger improvement in August, driven by increased new business inflows.
Across the UAE, hiring growth in the non-oil sector weakened in August, the softest in seven months. Some firms increased workforce to boost output, while others made staffing cuts. Input costs continued to rise steeply, with businesses citing higher expenses related to raw materials, transport, IT equipment, and maintenance. Wage costs also increased at the fastest pace since May. Nonetheless, projections for business activity strengthened in August after a dip in July, with firms positive about domestic economic conditions improving.
Overall, the UAE’s non-oil private sector showed signs of recovery in August, with increased output and sales growth. Despite the challenges posed by rising input prices and fluctuations in activity levels, businesses remain optimistic about future growth. With strong sales pipelines and a positive outlook on the economy, firms are hopeful of sustained expansion in the coming months. The UAE’s economic diversification efforts and the growth of non-oil trade indicate a promising trajectory towards a knowledge-based economy. It is essential for businesses to remain cautious about rising costs and adapt their strategies to navigate the changing economic landscape effectively.
