Dubai: Businesses in the UAE closed 2023 with a major plus - their input costs may have dropped quite a bit. And which sets them up nicely for what's to come this year. And with that, they are able to close the chapter on Covid disruptions once and for all.
"Not only did (UAE) businesses enjoy another substantial increase in output, but sentiment data suggested that they expect this growth to continue, with year-ahead expectations among the highest seen since prior to the COVID-19 pandemic," said David Owen, Senior Economist at S&P Global Market Intelligence, which has issued the PMI (Purchasing Managers Index) score for December.
When it comes to hiring trends, the pace is steady - and that too is a good thing for individuals' job prospects and for businesses.
What explains the upbeat mood?
"Supporting this optimism was a softening of price pressures, as purchasing costs rose to the least degree in almost a year," said Owen. "With wage pressures also remaining mild, firms were often willing to offer promotions and run down prices to remain competitive.
"While the drop in charges – the quickest since July – may support additional sales growth in early-2024, the findings suggest that firms are still keeping profit margins low as markets become more crowded."
Another key part of operational costs for businesses - that of fuel and transportation - have also seen some softening, according to industry sources. The one major cost that's still giving pain - finance costs from higher interest rates - too could see some drops once the US Federal Reserve decides the time is right for the first rate cuts since March 2022.
With wage pressures also remaining mild, firms were often willing to offer promotions and run down prices to remain competitive.
The S&P Global report notes - pointedly - that optimism on 2024 chances among businesses was 'largely based on robust sales pipelines'. "With this in mind, firms expanded their staffing levels, with the pace of job creation equalling the long-run trend," it adds.
"Overall, the index signaled a robust improvement in the health of the (UAE) non-oil private sector, driven by considerable uplifts in output and new orders," the S&P Global report states.
Second-best reading in four-and-a-half years. A sharp upturn in new business intakes drove a marked expansion in output levels, as surveyed companies commented on increased order book volumes and improved sales pipelines. Similarly, projections for future activity were among the strongest recorded since early-2020.
UAE businesses have gone through refinancing where possible to lock in their rate costs lower for longer. But there are limits to how much these can help as rates remain on the high.
The PMI for December signals a 'robust improvement' in the health of the non-oil private sector, driven by 'considerable uplifts in output and new orders'.