As we close the year 2024, the non-oil private sector of the United Arab Emirates has experienced its most robust growth in nine months, driven by favorable demand conditions that led to increased business activity and sales, according to S&P Global. The S&P Global UAE PMI, a key indicator of private sector performance, increased to 55.4 in December 2024, rising from 54.2 in November.
This marks the third consecutive month that the index has remained well above the neutral threshold of 50.0, signifying notable expansion within the sector. The increase in the PMI is attributed primarily to a sharp rise in output, as resilient market conditions have empowered non-oil companies to attract new clients and expand their order books, as demonstrated by the latest survey data. However, despite the positive signs of demand, companies have been strategically lowering output charges, aiming to stimulate sales growth even amid rising costs.
Notably, inflation saw a retreat to its lowest point since March 2024. Yet, the sector faces capacity challenges, including an escalation in backlogs of work and limited hiring opportunities. "Recruitment appears to be the limiting factor - the pace of employment growth was barely changed from November's 31-month low," remarked David Owen, a senior economist at S&P Global Market Intelligence.
Prolonged margin constraints seem to hinder some firms' abilities to recruit additional staff. Nonetheless, there remains a tangible need to enhance resources to capitalize on the growing demand as we enter the new year. In Dubai, the PMI also reflected positive growth, edging up to 55.5 in December from 53.9 in the previous month.
This increase highlights a faster growth rate in both output and new orders, fueled by strong client demand. However, the situation regarding inventory levels appears less favorable, with inventories of inputs experiencing a decline for the second consecutive month, consequently leading to higher output charges. Looking ahead, while firms across the UAE maintain a sense of optimism for 2025, there has been a noticeable dip in confidence, which has fallen to its second-lowest level since early 2023.
Companies based in Dubai exhibited particular caution, with only 6% of respondents projecting output growth in the upcoming year..