UAE's non-oil economy surges in October, highest PMI since 2019

Dubai: In October, the non-oil economy of the UAE experienced a substantial increase in demand, leading to the most significant improvement in operating conditions since mid-2019, according to the latest PMI survey data. This surge was supported by a sharp rise in new orders, resulting in increased activity and the hiring of more staff.

However, rising fuel and material prices led to a notable increase in business costs, with inflationary pressures reaching a 15-month high. In response, companies raised their selling prices, marking the first increase in a year and a half, although the adjustments were modest due to ongoing discounting efforts.

The seasonally adjusted S&P Global UAE Purchasing Managers' Index reached 57.7 in October, up from 56.7 in September, indicating a robust improvement in the non-oil private sector economy, the highest level since June 2019. This improvement was largely driven by a strong increase in new orders, both domestically and internationally.

"Strong economic conditions in the non-oil sector extended into the final quarter of the year, as October PMI results signalled a new recent record for new business growth,” said David Owen, Senior Economist at S&P Global Market Intelligence. “Rising at the fastest rate since June 2019, new order volumes provided additional support to output which continued to rise markedly.”

“High business confidence levels meanwhile suggest that firms do not expect this momentum to lose steam, as predictions for the year ahead were the second-strongest since March 2020,” he said.

The rise in new business supported increased activity across the non-oil sector, with a slight uptick in the rate of expansion. Inventory growth improved as firms responded to high demand by increasing their input purchases. This, along with higher employment levels, contributed to improved capacity and a reduction in backlog volumes.

Cost pressures intensified in the non-oil economy due to rising fuel and raw material prices, increased living costs, and efforts to retain staff. Input costs saw the fastest increase since July 2022, leading to a rise in selling prices for the first time in a year and a half. Despite this, the overall increase in charges was minimal, as some companies continued discounting.

Despite a slight softening from September, the outlook for business activity remained strong in October, driven by robust demand expectations, marking the second-highest level since March 2020.