UAE Non-Oil Business Sector Growth Slows In March, PMI Data Reveals Key Insights
In March, the UAE witnessed a decline in the expansion rate of its non-oil private sector, indicating a decrease in demand within the region’s most diverse economy, according to Reuters report.
The seasonally adjusted S&P Global Purchasing Managers' Index (PMI) for the month dropped to 54.0 from February's 55.0, the lowest growth rate observed since September 2024. This slowdown was reflected across various sectors, including Dubai's non-oil private sector, which saw its PMI decrease to a five-month low of 53.2, compared to 54.3 in the preceding month.
The slowdown in the UAE's economic momentum was further evidenced by the moderation in new order growth for the third consecutive month. The new orders index decreased to 56.3 in March from 57.3 in February, marking the softest expansion since October 2024.
According to David Owen, a senior economist at S&P Global Market Intelligence, "Some firms could be encountering challenges in meeting their sales targets," highlighting potential difficulties businesses are facing in stimulating sales.
Despite these challenges, companies in the UAE demonstrated resilience by significantly increasing their input purchases, the fastest pace seen since July 2019, in an effort to manage backlogs of work more effectively. Yet, the employment growth during this period was the slowest it has been in nearly three years, suggesting difficulties in finding suitable staff to fill positions. This situation was underscored by a rare reduction in employment within Dubai's non-oil private sector, despite a sharp but decelerating increase in new orders.
Meanwhile, during the first nine months of 2024, the UAE witnessed notable economic growth, with its real GDP increasing by 3.8% from the corresponding timeframe in 2023, achieving a total of AED 1.322 trillion. This period also saw a significant rise in the nation's non-oil GDP, which escalated by 4.5% to AED987 billion. The data highlights that non-oil sectors now account for 74.6% of the real GDP, overshadowing the oil-related activities, which make up 25.4%.
This economic expansion underscores the UAE's successful diversification efforts, moving away from its traditional reliance on oil revenues. The boost in non-oil GDP illustrates the country's robust economic strategies, emphasising the growing influence of various non-oil sectors in strengthening the national economy.
On the cost front, businesses experienced a moderate increase in input prices. Some firms reported higher expenses related to materials, whereas others benefited from reduced transport costs. This variation in input cost pressures reflects the diverse impacts of market conditions on different sectors within the non-oil private sector.
Even with these headwinds, UAE firms remain optimistic about their future prospects. Their confidence is buoyed by robust pipelines and significant national infrastructure development projects, suggesting a strong foundation for future growth despite the current slowdown in demand and employment challenges.
The UAE's non-oil private sector experienced a moderation in growth during March, impacted by softer demand and challenges in expanding employment. However, the commitment to increasing input purchases and the optimistic outlook for future growth underscore the resilience and adaptive strategies of businesses within the region.
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