The UAE and Saudi Arabia continue to demonstrate robust economic performance in their non-oil sectors, with recent PMI data highlighting sustained growth and business optimism despite rising costs. 

 

In the UAE, the S&P Global PMI held steady at 55.0 in February, well above the neutral 50.0 threshold, signaling strong expansion. Meanwhile, Saudi Arabia’s Riyad Bank PMI, though cooling slightly from January’s decade-high reading, remained firmly in growth territory at 58.4, down form 60.5 previously. 

 

The UAE’s non-oil private sector maintained its strong performance in February, with the S&P Global Purchasing Managers’ Index (PMI) holding steady at 55.0, well above the neutral 50.0 threshold that separates contraction from expansion. This marks a continuation of robust growth, with the year-to-date average exceeding the long-term trend of 54.4, reinforcing expectations that the non-oil economy will expand by 5.0% in 2024, consistent with earlier forecasts, said an Emirates NBD report.

 

Output growth accelerated in February, with nearly 30% of surveyed businesses reporting increased activity. However, new order growth slowed to its weakest pace since October, though it remained indicative of a healthy pipeline of business. Domestic demand continued to drive the expansion, while new export orders grew at a slower pace than overall orders, albeit slightly faster than in January.

 

Business costs rose at the sharpest rate since November, marking the first acceleration in seven months. This was primarily driven by higher purchase prices, while staff costs increased only marginally. In response, businesses raised their output prices for the second consecutive month, with the rate of increase hitting the fastest pace since September.

 

Despite rising costs, business sentiment improved slightly in February, with around 10% of firms expecting output to expand over the next year, compared to just 1% anticipating a decline. 

 

Dubai PMI dips to 3-month low

In Dubai, the S&P Global PMI fell to a three-month low of 54.3 in February, down from 55.3 in January. The decline was largely driven by a sharp slowdown in employment growth, which accounts for 20% of the overall index. Employment levels dropped to just above the neutral mark after two months of strong gains. Conversely, output surged to its highest level since October 2021, highlighting a mixed performance across sectors.

 

Input costs rose at the fastest pace since December 2021, prompting firms to pass some of these increases on to consumers, though the rate of price hikes slowed compared to January. Business optimism improved marginally, reflecting cautious confidence in the emirate’s economic prospects.

 

All three major sectors tracked in the survey — construction, travel and tourism, and wholesale and retail trade — saw declines in February. Construction remained the weakest performer, with a headline reading of 53.4, down from 54.0 in January. While output accelerated and business optimism improved, employment in the sector turned negative for the first time since February 2022.

 

Travel and tourism fell to 53.7, with new order growth at its slowest since September 2021. However, business optimism improved, and employment levels edged up slightly. Wholesale and retail trade also softened to 55.1, with slower new order growth and a modest dip in output. Employment in the sector grew slightly, but business optimism deteriorated, and output prices turned negative as firms sought to remain competitive.

 

Saudi Arabia’s non-oil sector remains strong

In Saudi Arabia, the Riyad Bank PMI cooled slightly from January’s decade-high reading but remained firmly in expansion territory at 58.4, down from 60.5. The figure is well above the neutral 50.0 mark, supporting forecasts for non-oil GDP growth of 4.5% in 2024, up from a preliminary estimate of 4.3% for the year.

 

Nearly a third of respondents reported increased output in February, while only 2% saw a decline. New order growth remained robust, though softer than the near-record levels seen in January. Domestic demand was bolstered by a rise in expatriate workers, while new export orders softened to a three-month low but continued to expand strongly.

 

Business optimism strengthened for the third consecutive month, reaching its highest level since late 2023, as firms anticipated robust economic growth ahead. Hiring activity accelerated, with the employment index hitting a 16-month high. Businesses also continued to build inventories, though the pace of purchases slowed from January.

 

Input costs rose at a faster pace than the series average, driven by both purchase and staff costs. Firms reported raising salaries to retain workers, and some of these higher costs were passed on to customers, with output prices increasing for the fifth consecutive month. However, the rise in prices was modest, as competitive pressures limited firms’ pricing power. - TradeArabia News Service