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Business Markets

UAE businesses record higher orders in February - but Red Sea situation is causing supply chain issues

New hiring growth was at fastest pace since May 2023 as new orders swelled

On the plus side, UAE businesses pulled in higher order volumes during February. On the flip side, there was some heavy discounting that they had to offer.
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Dubai: UAE businesses returned to a higher growth path last month after a slight slowing down during January, recording 'uplifts' in activity and of sales, according to the latest PMI numbers from S&P Global. 

"Firms again secured greater volumes of new orders as market demand and client activity remained on upwards paths," the S&P Global report notes.

This then set off the 'sharpest rise' in output levels since mid-2019, even though there are 'further signs that competitive pressures remained present'.

Red Sea situation

One issue that businesses did face was the disruption brought on to shipping line activity in the Red Sea, and which then started to show up in local supply chains. "Vendor performance improved to the least extent for seven months, while volumes of backlogged work rose at the sharpest rate for almost four years," the report finds.

"Concurrently, input prices rose solidly for the second month in a row, though this did not discourage firms from offering price cuts in an effort to beat competitors – in fact, charge discounting was the greatest seen since September 2020."


According to David Owen, Senior Economist at S&P Global Market, "Capacity pressures were apparent, with backlogs of work rising at their fastest pace in nearly 4 years, as Red Sea shipping disruption fed through into transport delays.

"Overall supply chain performance improved at the weakest rate since last July, but nonetheless still improved, suggesting that the impact on vendors is so far limited."

February's UAE PMI

The February's reading of the Purchasing Managers Index was 57.1, and up from 56.6 in January. This is a score that reflects strong business activity, whether that's based on orders, capex spending, job creation, or other parameters.  

"One of the PMI's largest components - the 'Output Index' - rose to its highest level since June 2019, pointing to a rapid expansion of business activity as firms look to take full advantage of strong market growth and maintain a competitive edge," the report adds.

Job numbers

As workloads piled up as well as to offset backlog growth, hiring by UAE businesses picked up during February. In fact, employment levels was expanding at the 'fastest degree since last May'.


"Business expectations suggest that companies are positive about the year, although concerns of a crowded market remain and appeared to dampen sales growth further," said Owen. "New orders rose at their softest rate for six months, suggesting output growth could also begin to slow."