TLDR:
Business activity picks up in UAE
New orders grow at slower pace
Market crowding affects job creation
ABU DHABI (The Thursday Times) — Growth in the United Arab Emirates’ non-oil private sector surged in October, driven by a sharp increase in output, despite a noticeable slowdown in demand. According to the latest data from S&P Global’s Purchasing Managers’ Index (PMI), the country’s seasonally adjusted PMI climbed slightly in October, marking a rebound after September’s three-year low. However, while output expanded, the pace of new orders softened, adding complexity to the non-oil sector’s broader economic outlook.
This uptick in non-oil sector performance signifies a gradual recovery in a region long focused on oil but increasingly invested in diversified economic growth. October saw the non-oil private sector maintain positive momentum, bolstered by robust sales and ongoing backlogs in the pipeline. Higher output rates underscore continued demand in the region, with businesses reporting substantial output growth supported by new contracts, both domestically and internationally.
Expansion of non-oil sectors in Abu Dhabi and Dubai
In Dubai, the commercial heart of the UAE, the growth rate showed signs of easing as the PMI for the city declined slightly in October. The drop reflects a unique economic environment in the emirate, balancing rapid expansion with structural adjustments across its sectors. October’s lower figures for Dubai contrast with the broader UAE’s performance, indicating possible shifts in sectoral focus or realignment in the tourism and commercial hub.
The UAE’s private sector has responded to these shifts by increasing its focus on efficiency and productivity, with significant expansions in various non-oil domains. Despite the challenges, job creation continued, although market crowding and economic adjustments in certain industries led to subdued employment growth rates. The overall business confidence within the non-oil sector remained cautiously optimistic, suggesting resilience even as growth rates adjust.
Evolving demand patterns and the impact on new orders
While demand grew in October, it marked the slowest rate in nearly two years. Local businesses have noted shifting patterns in consumer and business demand, pointing to intensified market competition. Although international demand helped buoy new sales, the domestic demand curve revealed signs of flattening. Businesses attribute this trend to increased market saturation, affecting both smaller companies and major players who are adapting to evolving consumer behaviours.
In Dubai, the moderation in new orders may signal a transitional phase for businesses, especially those linked to tourism and retail. This trend is noteworthy, as these sectors have traditionally led economic activity within the emirate, drawing foreign interest and investments. The resilience in new international orders provided some balance, keeping the UAE’s overall PMI in the positive zone.
Job creation challenges amid market saturation
Market crowding has begun impacting job creation, with respondents indicating a shift towards streamlining operations to counter the effects of increased competition. Hiring in October saw one of its lowest points in over two years, particularly as businesses faced heightened competition within domestic markets. While a long pipeline of backlogs continues to support potential future output, job creation remains a critical focus for sustainable growth. Many firms are seeking ways to balance cost pressures with operational demands, reflecting a broader industry-wide trend toward optimisation.
Business confidence has shown signs of improvement, especially in sectors with strong international sales performance. However, industry participants remain cautious, indicating that while the current growth phase supports a positive outlook, the need for adaptability and innovation remains crucial. The potential for output gains is high, yet dependent on balancing market pressures with forward-looking strategies.
