The Emirati private sector maintains strong growth momentum early in 2024.

Data from the first study of the Purchasing Managers’ Index in 2024 indicated a strong expansion in the non-oil private sector in the United Arab Emirates, with a rise in new business inflows leading to a significant increase in commercial activity.

The improvement in business conditions has been aided by increased demand, a higher number of customers, and promotional activity. However, this has resulted in a decrease in the rate of production growth to its lowest level in five months.

Similarly, the rate of job creation slowed down in January, while the increased risks in supply chains led to a faster increase in production costs for companies.

At 56.6 points, the Emirates Purchasing Managers’ Index (PMI) remained seasonally adjusted, which is a composite indicator designed to provide an accurate overview of operating conditions in the non-oil private sector economy – significantly above the neutral level of 50.0 points that separates growth from contraction.

However, the index declined from 57.4 points in December and recorded its lowest reading in five months.

The Purchasing Managers’ Index indicates a sharp but slower expansion in non-oil production in January.

The growth rate has decreased to its lowest level since August 2023, but it remains significantly stronger than the long-term average since 2009.

The committee members reported that the growth was attributed to an increase in sales, marketing, new and current projects, as well as government investments and initiatives.

A similar increase in the volume of new business was observed in January, with approximately a quarter of the participating companies indicating an increase compared to December.

Companies continued to highlight that the strength of demand conditions helped attract new customers and increase sales. Similar to December, the positive development was mainly due to local factors, as companies reported that the growth in new foreign orders was slight.

Despite continued sales and production strength, non-oil companies in the United Arab Emirates experienced a slight increase in their employment levels during the month of January. It is worth noting that the pace of growth was the slowest in slightly over a year.

On the other hand, purchases of production supplies continued to grow sharply as companies sought to increase their inventory and expected an increase in customer demand.

At the same time, some evidence indicated an increase in supply chain risks, resulting in delayed deliveries for some companies and increased shipping costs in January.

Despite a general decrease in delivery times, the degree of improvement was the weakest in six months, while a slowdown in the arrival of production supplies contributed to a significant increase in unfinished work volume.

At the same time, the increase in transportation costs led to a sharp rise in purchase prices compared to December. Companies also mentioned that rising material prices and salary adjustments resulted in a strong increase in expenses.

Despite this, the average prices of non-oil products and services offered by companies have decreased for the third consecutive month, reaching its lowest point since May 2023.

The majority of participating companies attributed this decline to increased competition and efforts to attract new customers.

Finally, the level of confidence regarding expectations for activity in the coming year was positively and almost equal to the average of 2023, despite a slight decline compared to December.

Companies generally expected that strong demand and robust sales would lead to sustainable production expansion. Additionally, the prospects of new projects and increased investments also contribute to boosting optimism.