Non-oil activity maintained its momentum in February, with growth in the sector remaining close to the nine-month high achieved in December due to a “notable rise in new business that fuelled a substantial upturn in output,” according to S&P Global UAE PMI (pdf). The headline figure stood at 55.0 in February, remaining unchanged from January.

REMEMBER- The all-important 50.0 mark is the threshold separating contraction from growth. Anything above 50 denotes expansion, while anything below indicates contraction.

Growth in new orders saw a slight slowdown: The new orders subindex fell to 57.3 in February, down from 59.0 in January, marking its lowest level since October of last year, according to data seen by Reuters. Around 29% of firms surveyed reported higher activity than in January, and just 5% reporting slowed activity

Some firms reported dampened growth driven by “competition from domestic and foreign sources,” prompting business owners to limit price hikes despite an uptick in cost pressures, the first since July 2024, driven by “the passing on of higher material prices by suppliers,” companies said, coupled with higher costs for maintenance and technology. Increased demand also drove up input purchases, though purchasing grew at its slowest pace in three months.

Still, the sector is showing signs of resilience: “The UAE PMI for February reflects the continued resilience of the non-oil private sector, supported by a strong demand, business confidence, and government reforms despite global economic and trade uncertainties,” National Bank of Kuwait Senior Economist Ahmed Issa told EnterpriseAM UAE.

Employment similarly remained steady throughout the month, with most firms keeping employment unchanged, while job creation remained limited. Meanwhile, the month saw a continued increase in the volume of unfinished business, driven both by administrative delays and the accumulation of new work. “While robust growth in business activity indicates that the pipeline of orders should eventually be addressed, other factors such as weak job creation and administrative delays pose risks to this outlook,” S&P Global Senior Economist David Owen said.

Business sentiment over the UAE’s 12-month outlook remains shaky: Firms’ confidence about future activity in the UAE remains limited, as businesses “continue to feel the pressure of intense competition, which has capped price increases,” Owen said. However, businesses remain “eager to secure new work, which contributed to a rapid accumulation of backlogged orders.”

MEANWHILE, IN DUBAI-

Business conditions in Dubai improved at a slightly slower pace in February, with the Dubai PMI slipping to 54.3, down from 55.3 in January. Growth remained solid due to an increase in new orders, while activity levels strengthened on the back of higher demand and softened price pressures.

Input prices increased at their slowest rate in four months, which led to only slight changes in output prices.

Expectations for the coming year saw a slight recovery: Output expectations among businesses in the emirate rebounded to a three-month high, but stayed relatively subdued nonetheless — which, in turn, contributed to firms keeping staffing levels unchanged since last month. However, inventory growth was supported by an uptick in input purchasing.

The emirate’s tourism, retail, and logistics sectors are to thank: “Dubai’s PMI results highlight the robust growth in key sectors, including tourism, retail sales, and logistics, driven by a sustained consumer and investor positive sentiment. The steady growth in output and domestic demand for both the UAE and Dubai reinforce their positions as key regional business hubs,” Issa told us.

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