UAE: Optimism in private sector hits highest level since Covid-19 pandemic

The UAE’s non-oil sector continued to perform strongly in August on the back of a big increase in new orders, higher investments, and tourism growth, boosting confidence in the private sector to the highest level since the outbreak of the Covid-19 pandemic in early 2020.

The seasonally adjusted monthly S&P Global UAE Purchasing Managers' Index (PMI) released on Tuesday reached 55.0 in August, down from 56.0 in July, signalling a sharp improvement in operating conditions.

The PMI is a weighted average of five indices — new orders, output, employment, suppliers' delivery times, and stocks of purchases. A reading above 50 indicates an overall expansion in economic activity.

"Strong demand conditions across the non-oil economy gave firms greater confidence about the path for future activity. The Future Output Index signalled that business sentiment was at its highest level since March 2020, having improved in seven of the eight months in 2023 to date,” said David Owen, senior economist at S&P Global Market Intelligence.

“The findings suggest that the outlook for the non-oil sector is highly positive, with surveyed firms signalling that this was supported by rising new order inflows, greater tourism, and increased investment,” he said.

The UAE has been one of the best-performing economies in the post-pandemic years for successfully handling Covid-19 and also becoming one of the first to open after the coronavirus. The UAE economy grew at a remarkably fast pace in 2022 at around 7.9 per cent, driven by the growth of all the key sectors. This trend continued into 2023, although at a bit lower pace as the economy cooled after tremendous growth in 2021-22.

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In an interview with Bloomberg TV recently, Abdulla Bin Touq Al Marri, the Minister of Economy, was confident of achieving 7 per cent GDP growth this year as well on the back of reforms and Comprehensive Economic Partnership Agreements (CEPAs) signed with multiple major trading partners.

However, the PMI survey showed a greater degree of confidence that strong economic activity will be sustained over the next 12 months.

Importantly, private firms in the country suggested a marked shortening of supplier lead times in August, as vendors often responded positively to requests for faster deliveries. The improvement was the strongest recorded since July 2019.

Employment levels expanded in the latest survey period, albeit only to a modest degree.

“Most PMI indicators continued to give positive signals, including uplifts in input purchases, inventory building, job creation and improving supply chain conditions,” added Owen.

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