Dubai: UAE businesses are seeing a pickup in fourth quarter activity, but that’s not yet translating into new hiring, according to the latest S&P Global monthly PMI reading.
Lower rate of job creation could be because UAE private sector is not seeing a marked increase in new orders, while they have the workforce to clear backlogs. According to S&P Global, the rate of job creation during October was its lowest in 30 months, based on the PMI (Purchasing Managers Index) tracker.
But sentiment among business owners definitely picked up in October after a dull September, when it had dropped to an 18-month low. Most importantly, they are forecasting growth to continue well into 2025.
But businesses will need to do some careful planning for the weeks ahead. "A softening of new business growth in October added to signs that the non-oil economy is losing strength after a robust growth period in late-2023/early-2024," said David Owen, Senior Economist at S&P Global Market Intelligence. "Firms in the survey panel frequently indicated that crowding in the market was eating into sales."
There could also be a bit of wait-and-see sentiment at work. This week sees the US Presidential elections, and there is the continuing uncertainty from the year-long conflict the Middle East has been witness to. Industry sources say that many of their clients are waiting for the outcome of the US elections to be decided when it comes to placing new orders and hiring decisions.
October PMI reading
The UAE private sector PMI score was 54.1 for October, which shows the economy and its businesses in growth mode. The corresponding figure for September was 53.8. (The PMI is based on businesses' inclination towards spending, order intakes, backlogs, hiring plans, etc. A score below 50 means the economy is in contraction.)
Where UAE businesses did well
All through October, businesses saw higher sales volumes, 'healthy work pipelines and robust client numbers'. In fact, 28% of survey respondents saw a rise in business activity over the month, while only 4% recorded declines.
"The main factor keeping the PMI above its previous reading was an expansion in business activity, which accelerated notably, albeit from September's 3-year low," said Owen. "Nevertheless, there are some reasons to suggest this could hold up, not least that firms are still seeing a long pipeline of work backlogs and ongoing contracts.
"This may ensure that the non-oil economy can continue to grow even if sales momentum slows further, though it may be more difficult to keep up this pace."
This week, businesses can expect some more benefits on their cost of operations, if the US Fed decides to continue the interest rate cut process that kicked off last month.
Pricing trends
Last month, UAE firms did reduce their output prices for the first time in six months in a bid to 'try and reverse slowing sales trend'. "Positively, this came at the same time as input price pressures softened, likewise to a six-month low," says S&P Global.
