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UAE's non-oil private sector shows resilience in February
Despite challenges like competition and rising costs, the sector continues to thrive
- PUBLISHED: Wed 5 Mar 2025, 10:05 PM
The UAE's non-oil private sector exhibited significant momentum in February, with business conditions continuing to improve robustly. The latest data, reflected in the seasonally adjusted S&P Global UAE Purchasing Managers' Index (PMI), remained steady at 55.0.
This figure, well above the neutral mark of 50, suggests that the sector is thriving, propelled by a marked increase in new business and output levels. David Owen, senior economist at S&P Global Market Intelligence, noted that February’s results indicate a consistent upward trend in the non-oil sector, following a peak in December.
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"The PMI reading of 55.0 demonstrates sustained growth, though businesses are navigating a landscape of intense competition and rising costs," he explained. In February, 29 per cent of surveyed firms reported increased activity compared to January, a stark contrast to the mere 5.0 per cent that experienced a decline. This uptick in business was largely driven by improved market conditions, effective advertising strategies, and moderated pressure on output prices.
Despite this positive momentum, companies faced significant challenges, notably from domestic and international competition, which tempered business confidence and restrained price hikes.The increase in business activity resulted in a sharp rise in order book volumes.
However, while the growth was strong, it showed signs of slowing compared to January's figures. The competition, both locally and from abroad, has dampened some growth potential, highlighting the necessity for firms to innovate and adapt swiftly to market dynamics.
A notable aspect of February’s performance was the increase in input purchases, the highest in over a year, although it marked the softest growth in three months. Many businesses are taking proactive measures to build inventories in anticipation of future demand. However, this positive trend was juxtaposed with ongoing issues, including labour constraints and delays in payment processes, leading to a significant backlog of unfinished work.
Employment growth in the non-oil sector remained limited, with many firms opting to maintain staffing levels rather than increase them.
Administrative delays and payment issues exacerbated backlogs, with firms reporting that securing timely payments from clients remained a persistent challenge. Approximately 10 per cent of surveyed firms expressed optimism about increasing their activity in the next 12 months, which is notably lower than historical norms but still reflects a cautious positivity. February marked the first acceleration in input cost inflation since July 2024.
Companies reported rising material prices and increased operational costs, which led to a modest but notable rise in output charges for the second consecutive month. This increase, although slight, was the most significant since September of the previous year.
As the UAE non-oil sector looks ahead to 2025, several factors will be critical in shaping its trajectory. The current growth trends, bolstered by strategic investments in infrastructure and technology, could provide a solid foundation for future expansion. However, addressing payment delays and enhancing operational efficiencies will be vital for maintaining competitiveness and fostering a more resilient business environment.
Analysts said while the UAE’s non-oil sector is experiencing robust growth, the path forward is fraught with challenges that require strategic navigation. With a focus on innovation, improved payment processes, and managing cost pressures, the sector could capitalise on its current momentum to foster sustainable growth in the years to come.