Stock - Abu Dhabi skyline
New orders and new projects seem to be what drove UAE private sector activity during January. That proved enough for businesses to scale up their hiring. Image Credit: Bloomberg

Dubai: UAE businesses recorded a significant increase in new orders during January – and at the same time were also hiring more than in previous months, according to the latest PMI update from S&P Global.

The new additions to the workforce will come as a surprise because UAE businesses had slowed down on new hires over concerns about a downturn for the global economy from a recession. Fewer job hires were seen as one way of lowering operational costs.

Also, market feedback was that job creation would take a backseat in first quarter 2023 until UAE businesses had a better understanding of where the global and regional economies were heading. But the S&P Global data suggests that many business owners were willing to hire now than wait.

Interestingly, the recruitment processes often took longer than usual and contributed to rising backlogs for businesses. (Also, staff costs were unchanged for a second straight month.)

"The (January) results showed that the non-oil sector remains in good health and, in particular, compares positively against a global economic slowdown towards the end of 2022,” said David Owen, Senior Economist at S&P Global Market Intelligence. “Activity levels rose sharply in response to another marked boost in new order inflows, although the rate of activity growth was the joint-slowest for 16 months.”

Weak exports

Where UAE businesses saw a decline was on the export side, which S&P Global attributes to ‘weak global conditions’. In fact, foreign sales declined at the fastest rate since June 2021.

While the UAE PMI was at a one-year low of 54.1 in January, it continued to signal a robust improvement
in business conditions at non-oil companies at the beginning of 2023

- David Owen of S&P Global

Slight dip for PMI

The January PMI (Purchasing Managers Index) reading shows 54.1, down on the 54.2 in December and the lowest since January 2022. (PMI readings provide an insight into what businesses are doing on orders, hiring, expansion plans, etc..)

January’s growth was driven by higher sales, while businesses put in more effort into marketing and also to complete existing projects. Yet, confidence levels on the immediate future remains on the lower side. “Despite improving slightly from December's recent low, the level of confidence remained among the weakest seen in the series history," said Owen. (The confidence levels recorded for December were the lowest in 22 months.)

Inflation receding?
Based on the S&P Global findings, the January data records a 'lack of inflationary pressures' for the non-oil private sector. Input prices were stable for a second month running, helped along by much improved supply chains and the 'partial alleviation of energy and transport price pressures'.

This more than compensated for price rises for some items.

Discounts get into the act

UAE firms were also willing to make additional cuts in their average prices. The 'modest'  discounting is however higher than those in December and was the 'fastest for five months, with firms often choosing to offer price promotions in a bid to attract sales'.