Increased Demand, Launching New Products-Increase UAE Business Confidence and Activity

The United Arab Emirate (UAE) non-oil economy compensates for plunging oil prices. The nation’s Purchasing Manager Index (PMI) revealed that despite the drop in oil prices, its non-oil sector continues to grow and strengthen. The PMI is an amalgamated pointer of UAE’s non-oil sector based on information and statistics taken from about 400 private-owned companies throughout the UAE. 

The UAE’s PMI reached 59.1 in January, indicating an increase of 0.7. The index was also the highest it has reached over the last three months.

The fact the UAE’s non-oil based sector showed a boost in activity from the beginning of 2015 is incredibly positive. However, the UAE expects that the PMI will fall within the year due to decreasing oil prices and less demand in exports, especially from markets within the Gulf area.

Nonetheless, the PMI in January marked a boost in UAE’s non-oil private-owned sector concerning production. The boost was attributed to higher demand, new products that were brought into the market and increase in new work. Consequently, income numbers marked an increase while the rate of growth increased slightly in comparison to the previous month. Furthermore, the price of input materials and purchasing price rose steadily.

The increase in the rate of output also contributed to the strengthening of UAE’s private non-oil sector. Just under 40% of panelists revealed a production growth in contrast to the previous month. New orders increased during January, which has steadily been increasing since August 2009.

UAE’s non-oil based sector has grown stronger due to increasing new orders from international as well as domestic markets. The excess of work added pressure concerning the UAE’s ability to meet rising demand. Demand has been increasing for the last nine months.

In order to meet continuous growth of demand, companies sought to employ more workers over January, resembling the same trend, which was noticed in the beginning of 2012. Higher production and launching of new products, led companies to hire new employees, therefore increasing the employment rate.

The PMI carried out in January 2015 reveals the UAE’s private non-oil sector strength. The sector still grows although oil prices are plunging. The UAE is confident that the private non-oil sector will remain strong throughout 2015, contributing a 4.3% growth in GDP and more precisely a 4.7% growth in GDP in Dubai.

In an effort to maintain production growth, non-oil private companies increased their purchasing activity during January 2015.  Concerning expenses and prices, input and purchasing prices still marked a steady increase. The increase in prices overall is thought to be due to higher demand-which led to the prices of raw materials to rise. Furthermore, income and salaries also rose slightly.