Businesses continue to create jobs as growth outlook improves
A mall in Dubai. The non-oil sector in the UAE is expected to post strong growth of 4.8% in 2023. – KT file
Business confidence in the UAE reached its highest level since October 2021 in May, according to the latest Purchasing Managers (PMI) survey, as employment grew at the second fastest rate in almost seven years and the economic outlook looked bright.
S&P Global’s UAE PMI report said on Monday that businesses continued to report a notable increase in activity and new orders, reflecting stronger demand conditions in the domestic economy, as well as a sharp improvement in supply chains, which helped curb cost pressures.
David Owen, senior economist at S&P Global Market Intelligence, said: “Hiring activity was also strong, with payrolls rising at the second fastest pace since July 2016, reflecting a strong willingness by companies to build capacity in anticipation of continued growth. “
Businesses continued to create jobs and increase purchases of inputs to provide buffer stocks as growth prospects improved, the report said.
Recruiters and job consultants have observed significant growth in the job market in the first quarter of 2023, contrary to global trends. Headquarters in particular saw an impressive 20% increase in vacancies. An upbeat market outlook and a surge in foreign investment have fueled the pick-up in the job market. Additionally, new projects and projects in the pipeline have spurred an increase in hiring.
Driven by strong domestic demand, the UAE’s non-oil sector is expected to post strong growth of 4.8% in 2023, especially in tourism, real estate, construction, transport and manufacturing, the World Bank said in a recent report. The UAE Central Bank has predicted that the pace of economic growth in the country will pick up next year as both the oil and non-oil sectors will perform better. The forecast is in line with the IMF’s forecast for a faster pace of economic expansion next year.
Owen said the UAE Purchasing Managers Index points to another strong performance by the non-oil sector in the middle of the second quarter of 2023. “Although down from April’s six-month high of 56.6, the latest headline figure of 55.5 points to a strong improvement in business conditions, driven by a notable uptick in activity and new jobs.
“Furthermore, an increase in new jobs and stronger demand conditions made businesses more confident about the year ahead. The future output index showed optimism rose to the highest level since October 2021, as businesses pinned their hopes on strong demand momentum to continue, said Owen.
Underpinning the surge in confidence was encouraging business cost data, which suggested that price pressures remained low in May, he noted. “Companies also saw a significant improvement in supply chain performance, as lead times for inputs shortened to the shortest time since September 2019,” Owen said.
The report pointed out that the improvement in operating conditions was mainly due to the sharp increase in sales in May. “The pace of new business growth was just shy of the 17-month high hit in April, with companies surveyed typically linking the upturn to new customers, greater marketing and growth in travel and tourism. New business growth fully Driven by domestic demand, as data for May continued to point to a flat trend in export sales.”
Expectations for next year’s economic activity rose for the fifth straight month to the highest level since late 2021, the PMI report said. “Nevertheless, the increased inflow of new orders put significant pressure on business capacity in May, extending the current backlog sequence to almost two years. Subsequently, businesses showed a greater degree of confidence in future activity, with the 12-month outlook jumped to the highest level since October 2021.”