Strong expansion of the non-oil economy in the UAE during November

The Standard & Poor’s Global Purchasing Managers’ Index (PMI) reported that the non-oil economy in the UAE continued its strong expansion in November. Strong demand rates and offering competitive prices to customers have helped a faster increase in new business, leading to another strong uptick in business activity.

The headline index – a seasonally adjusted composite index designed to provide an accurate overview of operating conditions in the non-oil private sector economy – registered a slight increase from 54.1 points in October, to 54.2 points in November. The index was above the neutral level of 50 points, indicating a strong improvement in the conditions of the non-oil producing economy.

The study data indicated a significant expansion in total commercial activity during November. Despite the slowdown compared to the previous month, the pace of production growth was slightly faster than the historical average, with about a quarter of companies participating in the study reporting an expansion in the pace of activity since July 2023.

However, with weak job creation and limited efforts to stockpile more inputs, production capacity pressures at non-oil producing companies remained high in November. At the same time, companies reduced their prices again, despite the significant increase in costs. The increase in production was often linked to strong market conditions, which also helped to significantly increase the volume of new orders. It is worth noting that the increase in new orders was the largest since August. Qualitative evidence from companies showed that winning customer trust, new marketing initiatives, and price discounts supported sales. The increased order volume often led to delays in the completion of orders. About a fifth of the companies included in the study reported an increase in the volume of outstanding work since October.

Production capacity levels were also affected by a somewhat weak assessment of future activity growth. Production expectations have improved only slightly from the 18-month low reached in September. On this basis, companies were reluctant to increase their inventory of production inputs, as existing production requirements were mostly consumed by new purchases. Companies reported a strong improvement in supplier lead times, which contributed to a slight increase in overall inventory.

New order flows in Dubai

The Dubai PMI rose to 53.9 points in November, compared to 53.2 points in October, but was slightly lower than the UAE-wide PMI (54.2).

The impetus behind the improvement in operating conditions across Dubai’s economy was the noticeable increase in new order flows, which were the fastest since August and stronger than what the UAE as a whole had witnessed. According to reports, customer sales were often supported by lower prices, and higher sales led to another strong increase in business activity.

The prices of products and services fell for the second month in a row, despite the sharp rise in the costs of production inputs.