UAE Non-Oil Private Sector Growth Slows Sharply in December Amid Global Economic Worries

Summary

Growth in the non-oil private sector in the United Arab Emirates slowed for a second consecutive month in December, while output growth slid to a 15-month low, according to a survey released on Wednesday. The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) fell to 54.2 in December from 54.4 in November, which is in line with the series average.

Economic Growth Slows Down in UAE Non-Oil Private Sector

Growth in the non-oil private sector in the United Arab Emirates slowed for a second consecutive month in December, while output growth slid to a 15-month low, according to a survey released on Wednesday. The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) fell to 54.2 in December from 54.4 in November, which is in line with the series average.

"The slowdown reflected downward movements in three of the PMI’s largest components, with output and new business growth both easing to 15-month lows, whilst employment rose at the softest rate in eight months," said David Owen, economist at S&P Global Market Intelligence. "While domestic demand conditions are holding up relatively strong, weakness in the global economy led to a first decrease in new export business since August 2021."

The PMI measures the activity level of the non-oil private sector and is an important indicator of economic growth. The output subindex continued to indicate a sharp expansion in non-oil private sector activity but eased to 58.8 in December from 59.9 in the previous month. This indicates that while growth is still present, it has slowed down compared to the previous month.

"The new orders subindex fell to 55.5 from 55.7 in November and the employment index also eased, falling to 50.6 last month from 51.5 in November," said Owen. "Job numbers at non-oil firms in the UAE continued to increase in the final month of the year, thereby extending the current run of growth that began in May."

This means that job growth has continued at non-oil firms in the UAE, but it is no longer as strong as it was in previous months. The survey also noted that employment numbers are rising, albeit at a slower rate than before.

"The vast majority of respondents kept employment stable," said Owen. "That said, the latest expansion in staffing was the weakest seen in this period and only marginal."

Looking ahead, companies in the UAE have less confidence about their prospects for 2023. A slowing in domestic conditions and worries over the global economy weighed on sentiment in December, with less than 7% of companies giving a positive prediction for 2023.

Global Economy Concerns Weigh Heavily on Firms’ Confidence

The survey found that external pressures are affecting the confidence levels of firms in the UAE. "Looking ahead, there were signs that growth should slow further through the next few months," said Owen. "A number of firms highlighted concerns over global economic conditions and expectations for weaker regional demand."

Firms in the UAE are facing a challenging environment in terms of external pressures, which is impacting their confidence about future growth prospects.

"Firm expectations for output, employment, and incoming new work during 2023 were lower than at any time since November," said Owen. "Expectations for inflation, cost rises, and exchange rates all weakened markedly."

Conclusion

The survey shows that while the UAE non-oil private sector is still growing, the pace of growth has slowed down in December compared to the previous month. The global economy’s weakness has led to a decrease in new export business since August 2021.

The PMI measures indicate that output and employment are still rising but at a slower rate than before. However, firms’ confidence levels have decreased due to concerns about domestic demand conditions and the global economic outlook.

Overall, the UAE non-oil private sector is facing a challenging environment in terms of external pressures and softening growth.