UAE non-oil business growth reaches a one-year high on strong demand

Dubai: Business activity across the UAE’s non-oil private sector strengthened in February, reaching its fastest pace in a year as companies reported rising demand, strong new orders and improving supply chain conditions.

The S&P Global UAE Purchasing Managers’ Index rose slightly from 54.9 in January to 55.0 in February, marking its highest reading in 12 months and signalling a solid expansion in business conditions.

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Output growth accelerated to its fastest pace since April 2024, supported by a steady flow of new work and continued momentum in sectors including construction, real estate, logistics and technology.

David Owen, Senior Economist at S&P Global Market Intelligence, said the data reflects a positive start to the year for the domestic economy.

“The UAE PMI signalled the strongest growth in non oil business conditions for a year in February, with output increasing rapidly in response to strong inflows of new work.”

Strong demand drives expansion

Companies reported a steep increase in new orders during February, with demand supported by a combination of tourism growth, expanding e commerce channels and rising interest in artificial intelligence related products.

Survey responses also highlighted targeted marketing efforts and successful contract work as key drivers behind the latest rise in activity.

International demand contributed modestly to the overall picture, although the bulk of the growth in sales appeared to be generated within the domestic market.

The surge in new projects and contracts placed additional pressure on operational capacity, leading to a noticeable build up of outstanding work during the month.

The backlog of unfinished orders increased sharply, reflecting both strong inflows of new work and administrative delays linked to shipments and project processing.

Hiring and inventories rise

Businesses responded to the growing pipeline of work by expanding their workforces.

Employment increased modestly during February, marking the strongest rise in staffing levels since November. Firms indicated that hiring efforts were aimed at expanding capacity and supporting future growth.

Companies also continued efforts to rebuild inventories of purchased inputs.

Supplier delivery times improved significantly during the month, allowing firms to increase their stock levels for the second consecutive month.

Many survey participants noted that suppliers demonstrated greater flexibility and were able to deliver goods more quickly in response to rising demand.

Owen said the improvement in supply chains helped companies position themselves for further expansion.

“Firms again faced relatively little friction when it came to input supply chains, with lead times improving rapidly. This allowed companies to rebuild stocks, putting them in a better position to meet client demand.”

Cost pressures ease

Input cost inflation eased during February, offering some relief to businesses following a spike in price pressures earlier this year.

Survey data indicated that input prices rose only marginally and at the slowest pace since October.

Many companies attributed the easing cost pressures to a drop in fuel prices, although some firms continued to report increases in the cost of raw materials.

Selling prices continued to rise for the eighth consecutive month, though the pace of increase remained modest amid strong competition.

Owen said the latest data suggests that recent cost pressures may be moderating.

“Non oil firms also signalled a slowing of input cost inflation in February, helping to soothe concerns after last month’s spike in price pressures.”

Dubai activity remains strong

Dubai’s non oil private sector also expanded during February, though the pace of growth softened slightly.

The Dubai PMI fell from 55.9 in January to 54.6 in February. The reading still indicates solid growth in operating conditions despite a modest slowdown in output and new order growth.

Businesses in the emirate continued to report new opportunities linked to tourism, population growth, marketing initiatives and the adoption of artificial intelligence technologies.

Companies also stepped up hiring activity, with employment rising at the fastest pace seen in two years.

Cost pressures eased in Dubai as well, with total input costs rising at the slowest pace in seven months.