UAE non-oil business activity continued to grow in November on new order boost

Sharp improvement in demand last month also drove a marked increase in purchasing activity

UAE flags lining a street in Dubai. Non-oil business activity has maintained a robust growth momentum this year. Pawan Singh / The National
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Business activity in the UAE's non-oil private sector economy continued to strengthen in November, driven by a marked improvement in demand as new orders inventories rose sharply.

The seasonally adjusted S&P Global purchasing managers’ index ­– a key gauge of the nation’s non-oil economy – hit 57 in November, slightly lower than the four-year high of 57.7 it reached in October.

A reading above the neutral level of 50 indicates growth while one below it points to a contraction.

The growth momentum across the private sector non-oil economy drove “a marked increase in purchasing activity” last month amid healthy demand conditions.

The upturn led to the biggest expansion in inventory levels for close to six years, placing some pressure on supply chains and material prices.

While cost inflation remained stronger than the recent survey trend, selling prices in November 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,” David Owen, senior economist at S&P Global Market Intelligence, said.

“Indeed, the uplift in buying … supported the most rapid build-up of stocks in close to six years, benefitting both local businesses and trade partners.”

New orders, among the main drivers of business activity in the Emirates, continued to grow last month on increased demand, new clients, project inquiries and marketing efforts.

Although the expansion in total sales was one of the fastest seen in nearly four-and-a-half years, it was softer than the level achieved in October, with some of businesses surveyed noting increased competitive pressures and a softer rise in new export orders.

Output levels in the Arab world's second-largest economy also rose last month, expanding at the sharpest pace since June this year.

The UAE economy expanded by 3.7 per cent annually in the first half of the year, driven by strong non-oil sector growth as the country continues to pursue its diversification goals, Minister of Economy Abdulla bin Touq said in October.

While the first-half rate of economic growth “may seem modest” compared with last year, it is still “robust growth against the backdrop of global and regional uncertainty”, Mr bin Touq said.

The non-oil sector's “staggering” 5.9 per cent growth in the first six months of the year is “even better news”, as it accounts for about 71 per cent of gross domestic product, illustrating the success of the UAE’s diversification initiatives, he said at the time.

The UAE’s economy is expected to expand by 3 per cent this year and 4 per cent next year, driven by strong growth in its non-oil sector, S&P said in a September report.

Key contributors to the country's economic growth next year will include the wholesale trade, industry, real estate, construction, financial services and tourism sectors, as well as oil and gas, it said.

The latest S&P survey data indicated another increase in purchase prices in November, which, despite softening from October levels, was the second-quickest since the middle of last year.

While non-oil businesses expect activity levels to remain on an upwards trajectory, some of the businesses surveyed expressed caution, citing "competitive pressures" that could erode market share.

"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," Mr Owen said.

Updated: December 06, 2023, 7:16 AM