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Business confidence in the UAE reached its strongest level in May since October 2021 amid brightening economic prospects as the employment rate rose at the second-fastest rate in nearly seven years, according to the latest purchasing managers’ (PMI) survey report.
Businesses continued to report marked increases in both activity and new orders, reflecting strengthening demand conditions in the domestic economy, as well as a sharp improvement in supply chains, which helped to keep cost pressures subdued, S&P Global’s UAE PMI report said on Monday.
“Hiring activity was meanwhile robust, as job levels increased at the second-fastest pace since July 2016, reflecting a strong intent at companies to build capacity in the hope of sustained growth,” said David Owen, senior economist at S&P Global Market Intelligence.
The report noted that with growth prospects picking up, businesses continued to create jobs and lift input purchases to provide buffer stocks.
Recruiters and job consultants have observed significant growth in job market in the first quarter of 2023, contrary to the global trend. Head offices in particular have witnessed an uptick, with an impressive 20 per cent increase in available positions in certain sectors. The upswing in the job market was driven by an optimistic market outlook and a surge in foreign investment. Also, new projects and those in the pipeline spurred the pick-up in recruitment.
The World Bank said in a recent report that the UAE’s non-oil sector is poised to achieve strong growth of 4.8 per cent in 2023, driven by robust domestic demand, particularly across tourism, real estate, construction, transportation, and manufacturing sectors. The Central Bank of the UAE forecasts a faster pace of economic growth for the country next year as both oil and non-oil sectors are expected to perform better. This forecast was in line with the International Monetary Fund’s forecast of a faster pace of expansion for the economy next year.
Owen said the UAE PMI pointed to another strong performance across the non-oil sector midway through the second quarter of 2023. “Despite slipping from April’s six-month high of 56.6, the latest headline reading of 55.5 signalled a robust improvement in business conditions, driven by marked upturns in activity and new work.
“Moreover, rising new work intakes and strengthening demand conditions gave firms greater confidence for the year ahead. The Future Output Index showed optimism rising to the highest level since October 2021, with firms pinning their hopes on projections that the strong run of demand momentum will continue,” said Owen.
He noted that underpinning the confidence surge was promising data on business costs, which signalled that price pressures remained subdued in May. “Firms additionally saw a sharp improvement in supply chain performance, as lead times on inputs shortened the most since September 2019,” said Owen.
The report noted that the improvement in operating conditions largely arose from a sharp uplift in sales volumes in May. “New business intakes rose at a pace that was only marginally slower than April’s 17-month high, with surveyed firms often associating the upturn with new clients, greater marketing and increased travel and tourism. New business growth was solely driven by domestic demand, as May data continued to signal a flat trend for export sales.”
The PMI report said expectations towards activity over the next year improved for the fifth consecutive month to the highest level since late-2021. “Rising new order inflows nonetheless exerted great pressure on business capacity in May, extending the current sequence of backlog accumulation to almost two years. Subsequently, firms displayed a greater degree of confidence in future activity, with the 12-month outlook jumping to its highest level since October 2021.”
