Prime Highlight:
- The UAE’s non-oil economy showed strong momentum at the start of the year, with the fastest growth in new orders in nearly two years, driven by solid domestic demand.
- Businesses increased output and purchasing activity, signaling confidence, even as higher input costs pressured margins.
Key Facts:
- The UAE Purchasing Managers’ Index rose to 54.9 in January from 54.2 in December, marking its highest level in 11 months.
- New order volumes expanded at the quickest pace in 22 months, while input costs climbed to an 18-month high due to higher raw material prices.
Background
The UAE’s non-oil private sector recorded its fastest rise in new orders in nearly two years in January, pointing to stronger domestic demand and steady economic momentum, according to a business survey released by S&P Global.
The Purchasing Managers’ Index for the UAE rose to 54.9 in January from 54.2 in December, marking an 11-month high. Any reading above 50 shows that business activity is growing. The latest figure reflects rising sales, higher output, and improved operating conditions across the non-oil economy.
S&P Global said new order volumes increased at the quickest pace in 22 months, supported by stronger domestic demand and positive responses to new products and services. Firms raised output levels and expanded purchasing activity to meet rising demand. Stock levels also increased as supplier delivery times improved, easing pressure on business capacity.
David Owen, senior economist at S&P Global Market Intelligence, said the non-oil economy started the year on a strong footing as companies reacted quickly to rising orders. However, higher purchasing activity raised input costs to an 18-month high, as firms paid more for raw materials. Still, intense competition forced many businesses to keep prices low, absorbing the extra costs to protect their market share.
The UAE’s results follow a regional trend, as Middle East and North Africa economies rely less on oil revenue. Saudi Arabia led the region, with its PMI rising to 56.3 in January, thanks to higher output and stronger client demand.
In Dubai, businesses outside oil grew stronger. New business reached its highest level in 22 months. Sales increased, so companies hired more staff and built up stock. Business confidence also rose to a four-month high.
In contrast, Lebanon’s private sector weakened. The PMI dropped to 50.2, a six-month low, as new orders slowed and foreign demand fell. Businesses reduced purchases and stayed cautious about the year ahead because of ongoing economic and security problems.
