Business activity rebounds on back of new order uptick

Seasonally-adjusted S&P Global UAE Purchasing Managers’ Index rises to 54.2 in August

Top Stories

UAE announces 2-month grace period for residence visa violators

UAE announces fee refund for tax service charges from August 1

Paid parking in Dubai: Residents face up to Dh4,000 extra yearly costs when new rates kick in

A shopping mall in Dubai. In Dubai, operating conditions in the non-oil private sector improved at a stronger pace in August, according to PMI survey data. — File photo

Published: Wed 4 Sep 2024, 8:08 PM

The UAE’s non-oil private sector growth regained momentum in August after expanding at its slowest pace in 34 months in July underpinned by a pickup in new orders, according to the latest survey data from S&P Global.

The seasonally-adjusted S&P Global UAE Purchasing Managers’ Index rose to 54.2 in August from July’s 53.7 as both output and sales growth strengthened.

The output sub-index rose to 59.1 last month from 58.1 in July, lifted by new business and project work, but the rate of expansion was among the slowest in the past three years.

Businesses in the non-oil private sector, however, remained confident about the outlook over the next 12 months, with the degree of confidence increasing for the first time since May, according to the survey.

In 2023, the UAE non-oil trade reached a record high of Dh3.5 trillion as trade in non-oil goods rose 12.6 per cent from the previous year, while exports of goods and services surpassed Dh1 trillion to set a new record.

According to Dr. Thani bin Ahmed Al Zeyoudi, UAE Minister of State for Foreign Trade, the performance confirms that economic diversification plans are moving in the right direction towards a future economy based on knowledge and innovation and reflects the growing international confidence in the UAE’s economy.

“Firms should still be wary of their costs, as the survey data indicated another sharp increase in input prices in August,” the S&P report said, adding that ongoing price mark-ups have the potential to curb demand.

David Owen, senior economist at S&P Global Market Intelligence, said although the UAE PMI picked up in August and was consistent with a solid expansion in non-oil business conditions, it remained weaker than the levels recorded earlier in the year, as fewer companies reported uplifts in activity.

"Nevertheless, businesses remain confident that output growth will be sustained over the coming year, especially as sales pipelines remain strong and firms have ample levels of outstanding work to complete. Capacity constraints are also easing which should further aid business activity. "However, firms should still be wary of their costs, as the survey data indicated another sharp increase in input prices in August, which drove through another uptick in prices charged to customers. Ongoing price mark-ups have the potential to curb demand, adding some uncertainty to the view that growth will continue unabated,” said Owen.

In Dubai, operating conditions in the non-oil private sector improved at a stronger pace in August, according to PMI survey data. This was largely due to a quicker increase in new business inflows, as the rate of demand growth picked up to a five-month high, the survey report said.

“Stockpiling of inputs resumed, following the first reduction in exactly two years. Nevertheless, the rate of expansion in Dubai business activity slowed and was the least marked since September 2021. Similarly, employment levels rose at a milder rate. Dubai non-oil firms continued to face upward pressure on their input costs in August. Prices rose sharply, albeit at the slowest pace since May. Average selling charges rose for the fourth month in a row and to the greatest extent since April 2021,” said the report.

Across the UAE, the non-oil sector hiring growth weakened in August and was the softest for seven months. While some firms added to their workforces to boost output, others made cuts to staffing levels. August survey data pointed to another steep increase in average input costs, with businesses often commenting on higher expenses related to raw materials, transport, IT equipment and maintenance. Wage costs also increased at the fastest pace since May.

Projections for business activity strengthened in August after falling to a six-month low in July, with firms largely positive that domestic economic conditions will improve. Companies also suggested that strong sales pipelines would shore up output over the coming months.