The UAE’s non-oil business sector experienced a dynamic 2024, marked by both robust expansion and periods of moderation. While January saw strong growth, subsequent months like March and May indicated a slowdown, influenced by factors such as competitive pressures and global tariffs. Despite these fluctuations, underlying demand remained strong, and businesses maintained optimism for future growth.
Navigating the Peaks and Valleys of UAE’s Non-Oil Economy in 2024
Key Takeaways
- The UAE’s non-oil private sector demonstrated fluctuating growth throughout 2024, with strong starts in January followed by slowdowns in March and May.
- The S&P Global Purchasing Managers’ Index (PMI) remained above the 50.0 growth threshold, despite dips.
- Factors influencing growth included strong demand, competitive pressures, and the impact of global tariffs.
- Employment growth showed mixed signals, with some months seeing increased hiring to clear backlogs, while others noted difficulties in recruitment.
- Businesses generally maintained optimism for future growth, supported by strong sales pipelines and national infrastructure development.
January’s Robust Start
January 2024 kicked off with a robust expansion in the UAE’s non-oil private sector. The S&P Global UAE Purchasing Managers’ Index (PMI) registered 55.0, slightly down from December’s 55.4 but still indicating strong growth. This expansion was driven by favorable market conditions and easing cost pressures, leading to sharp increases in business activity and new orders. However, capacity pressures persisted, with backlogs of work rising, and overall business confidence saw a slight dip compared to the previous year.
March and May See Slowdowns
Growth moderated in March, with the PMI slipping to 54.0 from 55.0 in February, marking the slowest pace since September. New order growth also slowed for the third consecutive month. Despite this, businesses increased input purchases to clear backlogs, though employment growth hit a nearly three-year low due to recruitment challenges.
The slowdown continued into May, with the PMI falling to 53.3, its lowest since September 2021. This moderation was attributed to competitive pressures and weaker trade amid US tariffs. Output expansion was the slowest in 44 months, and new order growth, while robust, also softened. Businesses streamlined inventories and optimism for future output reached its lowest level since January.
April’s Steady Growth and Hiring Surge
April provided a period of steady growth, with the PMI holding at 54.0. New order growth quickened, partly due to increased international demand. Notably, employment rose at its fastest pace in 11 months as firms sought to reduce workloads and support new business. Despite a slowdown in overall business activity, firms remained optimistic about future prospects, citing strong sales pipelines and resilient market conditions.
Underlying Resilience and Future Outlook
Despite the fluctuations, the UAE’s non-oil economy demonstrated underlying resilience. Demand conditions remained supportive, and the PMI consistently stayed above the 50.0 growth threshold. The government’s focus on economic diversification, including technology, manufacturing, tourism, and trade, continues to bolster the sector. While global tariff uncertainties posed challenges, many local companies reported minimal impact due to established supply chains. The Central Bank projects continued strong non-oil growth for the UAE in the coming years, indicating a positive long-term outlook for the sector.
Sources
- UAE non-oil business sector growth slows in March, PMI shows, Reuters.
- UAE non-oil business growth slows in May, PMI shows, Reuters.
- UAE non-oil business sector expands robustly in January, PMI shows, Reuters.
- UAE non-oil business grows steadily in April as hiring speeds up, PMI shows, Reuters.
- UAE non-oil business activity down in May amid tariff pressures, The National.
