The United Arab Emirates' non-oil private sector recorded its fastest expansion in nine months in December 2024, buoyed by strong domestic demand and increased business activity, according to the latest S&P Global Purchasing Managers’ Index (PMI) report.
PMI Highlights Robust Growth
The seasonally adjusted UAE PMI climbed to 55.4 in December from 54.2 in November, signaling robust growth well above the 50.0 threshold that separates expansion from contraction. This marked the third consecutive monthly increase, underscoring sustained recovery in the non-oil sector.
Key drivers of growth included a notable rise in new business activity. The new orders subindex rose sharply to 59.3 in December from 58.0 in the previous month, reflecting strong domestic demand.
Challenges Amid the Growth
While domestic demand flourished, export growth slowed, with the export orders subindex dropping to a seven-month low. Additionally, businesses faced mounting backlogs due to capacity constraints, as highlighted by David Owen, senior economist at S&P Global Market Intelligence:
"Capacity levels remain under considerable stress, illustrated by another marked increase in backlogs of work."
Despite these challenges, firms appeared hesitant to hire aggressively, with job creation at its slowest pace in over two-and-a-half years. Margin pressures and competitive pricing may have contributed to the cautious approach.
Costs and Competitive Pricing
Easing input cost inflation provided a silver lining for businesses, dropping to its lowest level since March 2024. This allowed firms to offer discounts, sustaining competitiveness in a vibrant market.
However, despite the positive momentum, businesses remained cautious about future activity levels, reflecting tempered optimism.
Dubai’s Strong Performance
The emirate of Dubai mirrored the national trend, with its headline PMI rising to 55.5 in December from 53.9 in November, marking its strongest growth in operating conditions in nine months.
Outlook for 2025
The December PMI report paints a positive picture of the UAE's non-oil economy as it heads into 2025, fueled by strong domestic demand and easing cost pressures. However, to capitalize on growth opportunities, addressing capacity constraints and bolstering employment will be critical.
With the UAE's strategic emphasis on diversification and innovation, the non-oil sector is poised to play a pivotal role in sustaining economic resilience and competitiveness on the global stage.
Comments
Post a Comment