UAE Non-Oil Business Growth Slows in May, PMI Shows

UAE Non-Oil Business Growth Slows in May, PMI Shows

June 6, 2024 : A recent survey by S&P Global revealed a moderation in the growth rate of the United Arab Emirates (UAE) non-oil business sector during May. This slowdown is attributed to limitations in production capacity, which hindered companies’ ability to meet rising demand.

The survey, known as the Purchasing Managers’ Index (PMI), provides a monthly snapshot of business activity in the private sector. A PMI reading above 50 indicates expansion, while a below 50 signifies contraction. In May, the UAE’s non-oil PMI registered at 55.3, marking a 16-month low. This suggests a slower pace of growth compared to previous months.

The survey specifically highlighted capacity constraints as a key factor in dampening growth. Businesses reported struggles to keep up with rising orders, leading to a significant backlog of unfulfilled work—the largest recorded since the survey’s inception in 2009.

Despite the slowdown, some positive aspects were identified. The survey indicated a continued increase in new orders, albeit slower than in April. This suggests that underlying demand for goods and services remains robust within the UAE’s non-oil sector. Additionally, employment levels rose for the third consecutive month, indicating a willingness among businesses to expand their workforce to address capacity issues.

Furthermore, businesses reported increased purchasing activity, suggesting efforts to build inventories and ramp up production in the coming months. If capacity constraints can be addressed, this could potentially lead to a rebound in growth.

Looking ahead, the outlook for the UAE’s non-oil sector hinges on the ability of businesses to overcome capacity limitations. Investments in expanding production capabilities and streamlining operations will be crucial for meeting future demand and sustaining growth.

While concerning, the slowdown in non-oil sector growth does not necessarily negate the UAE’s overall economic prospects. The positive aspects identified in the PMI survey, such as continued new order growth and rising employment, suggest underlying strengths within the economy. Successfully resolving capacity constraints will be a key factor in determining the pace of future expansion in this important sector.

 

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