Sign in
Non-oil business activity records tapered growth: While the non-oil private sector continued to expand, output growth slowed to a five-month low in January, according to S&P Global’s purchasing managers’ index (pdf). The index inched down to 56.6 from 57.4 in December, still remaining above the 50.0 threshold that separates growth from contraction.
“Slight moderation” from 4.5-year high: “Whilst the UAE non-oil economy largely continued where it left off at the end of 2023, the PMI’s dip to 56.6 in January pointed to a slight moderation of growth from the sector’s best quarterly performance in four-and-a-half years,” Senior Economist at S&P Global Intelligence David Owen said.
Strong domestic demand underpinned growth:Business growth was fueled by improved sales and marketing efforts, ongoing and new projects, increased investments, and government initiatives, with strong domestic demand driving output, according to the report. Business also ramped up input purchases as firms continued to replenish their stocks to keep up with heightened demand, the report said.
On the downside, hiring is taking a hit: Firms recruited new staff at the slowest rate in more than a year in January, with Owen noting that “strong demand and business optimism failed to translate into greater hiring.”
And supply chain disruptions impacted delivery, backlogs and pricing: Moderate delivery delays, growing backlogs and increased shipping costs ensued as supply chain risks persisted on the back of ongoing Red Sea attacks, according to Owen. Purchasing remained strong due to growing demand, but higher shipping costs led to a quicker increase in purchase prices.
Should we be worried about inflation? Companies reported higher material costs and salary adjustments added to their bills, the survey shows. “The impact on inflationary pressures so far has been notable but not severe, as input costs rose at a faster rate than in December but remained slower than in the preceding three months,” S&P Global senior economist David Owen said. However, businesses did not increase product prices for the third consecutive month because of a “build-up of competition” and their targeting of new customers.
Business confidence remains high: Optimism for the non-oil sector’s growth over the next 12 months remains high despite the small dip from December, with firms anticipating robust demand and sales to drive output expansion, coupled with expectations for new projects and increased investment.
FROM THE REGION-
- Saudi PMI dips: Saudi Arabia’s PMI (pdf) stood at 55.4 in January, down from 57.5 in the previous month. This is the weakest growth in non-oil activity since January 2022 with higher costs, interest rates, and supply chain risks to blame.
- Egypt’s PMI contracts for 38th consecutive month: Non-oil business activity in Egypt stood at 48.1 in January, down from the 48.5 recorded in December, as inflationary pressures continued to weigh on demand, according to its PMI (pdf).
