UAE’s non-oil business activity growth eases slightly in March, PMI shows

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The Burj Khalifa building peaks through the skyline as the sun sets over Dubai, United Arab Emirates, September 9, 2023. REUTERS/Amr Alfiky/File Photo © Thomson Reuters

In March, the growth trajectory of the non-oil business sector in the United Arab Emirates (UAE) showed a slight deceleration, according to the findings of a survey released on Wednesday. This moderation in growth was attributed in part to supply constraints arising from disruptions in shipping routes through the Red Sea, contributing to a buildup of backlogs in the sector.

The seasonally-adjusted S&P Global UAE Purchasing Managers’ Index (PMI) dipped to 56.9 in March from 57.1 in February, although it remained comfortably above the key threshold of 50, indicating expansion within the sector. Despite the slight dip in the overall index, the output sub-index remained robust at 62.7, signaling continued strong momentum in business activity driven by both new orders and ongoing projects.

Of notable concern was the surge in backlogs of work, with the sub-index reaching its joint-highest level of 59.8, a level not observed since June 2018. Factors contributing to this increase included sustained demand, administrative delays, and disruptions in shipping routes passing through the Red Sea. These challenges underscored the complexities faced by businesses in managing operational efficiency amid external disruptions.

David Owen, senior economist at S&P Global Market Intelligence, acknowledged the concerns surrounding the surge in backlogs but remained optimistic about the overall outlook for the UAE non-oil private sector. He emphasized that once underlying issues are addressed, the pent-up demand is poised to sustain activity growth over the longer term.

The new orders sub-index, which rose to 61.5 in March from 60.4 in February, reflected ongoing strong demand within the sector. Furthermore, the survey revealed an increase in optimism among non-oil businesses regarding future prospects, reaching its highest level in six months. This uptick in sentiment suggests confidence in the resilience of the UAE economy and the potential for continued expansion in the non-oil sector, despite prevailing challenges.

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