Strong demand and increased business activity propelled growth in the UAE’s non-oil private sector to its fastest pace in nine months, according to the latest S&P Global Purchasing Managers’ Index (PMI) report.
The seasonally adjusted PMI for the UAE rose to 55.4 in December from 54.2 in November, marking the third consecutive monthly increase. The index remained well above the 50.0 threshold, which separates expansion from contraction.
Surge in New Business
The robust growth was driven by a sharp rise in new business, with the new orders subindex climbing to 59.3 from 58.0 in the previous month. This indicates strong domestic demand, although export demand growth slowed to a seven-month low.
“Firms are capitalizing on increased demand, but export markets seem to be facing challenges,” said David Owen, senior economist at S&P Global Market Intelligence.
Capacity Constraints and Recruitment Challenges
The rapid accumulation of backlogs pointed to significant pressure on operational capacity. Despite this, hiring activity remained sluggish.
“Capacity levels remain under considerable stress, as evidenced by the marked increase in backlogs of work,” Owen noted. “However, margin constraints seem to be deterring firms from expanding their workforce, despite the clear need to boost resources to meet demand.”
Easing Cost Pressures
Input cost inflation eased to its lowest level since March 2024, offering some relief to businesses. Firms also continued to lower prices amid intense competition, despite the solid expansion in demand.
This combination of factors suggests that while businesses are benefiting from increased activity, competitive pricing strategies are limiting profit margins.
Dubai Leads the Way
Dubai, the UAE’s commercial hub, recorded a particularly strong performance, with its headline PMI rising to 55.5 in December from 53.9 in November. This signals the most robust growth in operating conditions in nine months for the emirate.
Outlook Remains Cautious
Despite the positive momentum, business confidence remained subdued as firms expressed caution about future economic conditions.
The report underscores the UAE’s ongoing efforts to diversify its economy away from oil, with non-oil sectors showing resilience amid global economic uncertainties. However, challenges such as export demand weakness, capacity pressures, and cautious hiring highlight areas for potential improvement in 2025.
