The United Arab Emirates (UAE’s) non-oil businesses are experiencing a surge in demand, leading to a record increase in outstanding work, according to data from the latest S&P Global UAE Purchasing Managers’ Index (PMI). While this indicates a robust improvement in operating conditions, it also highlights capacity pressures faced by many companies.
Surge in Demand, Backlog Blues
The seasonally adjusted S&P Global UAE PMI for May 2024 remained unchanged from April’s eight-month low of 55.3, but still sits above the long-run average of 54.4. This signifies continued growth in the non-oil sector. However, the key takeaway is the record-high backlog of work reported by businesses. David Owen, senior economist at S&P Global Market Intelligence, attributes this surge in backlogs to a confluence of factors:
- Robust Sales Pipelines: Many companies are experiencing strong demand, with new orders continuing to rise.
- Supply Chain Challenges: Ongoing disruptions in the global supply chain are making it difficult for some businesses to acquire necessary materials, hindering their ability to fulfill orders promptly.
- Flooding Impact: The recent flooding crisis in April further strained capacity by disrupting operations and causing project delays.
A Balancing Act
While the backlog signifies a positive trend in terms of economic growth, it also presents challenges. Businesses need to find ways to manage their workload effectively to avoid impacting customer satisfaction and delivery timelines.
Looking Ahead
The future outlook for the UAE’s non-oil sector remains positive. However, businesses will need to navigate the challenges of managing backlogs, potential labor shortages, and rising input costs. This will require strategic planning and potentially increased investments in production capacity.
