RIYADH: UAE non-oil private sector growth remained flat in July but marked slowest improvement in nearly three years, economic tracker shows
According to the S&P Global Purchasing Managers' Index, the Emirates PMI fell to 53.7 in July from 54.6 in the previous month, with competitive conditions, higher price pressures and excess capacity weighing on performance.
In July, the index remained below its long-term average of 54.4 but remained firmly above the 50 expansion mark.
“The UAE PMI decline is a further sign that non-oil growth is likely to slow in 2024,” said David Owen, chief economist at S&P Global Market Intelligence.
“Business viability remains one of the key challenges facing the sector, as evidenced by rapidly increasing backlogs as companies struggle to solve sourcing and administration issues,” he added.
In March, the UAE's Minister of Economy Abdullah bin Touk said the Emirati economy was expected to grow by 5 percent this year, boosted by strong growth in the non-oil sector and an increase in foreign direct investment.
The minister also said that the UAE's non-oil economy currently accounts for 73 per cent of the country's gross domestic product.
S&P Global reports that inflation rose in July as companies saw their input costs rise at their fastest pace in two years.
The monetary authority said higher input prices were also passed on to some customers as input fees rose for a third straight month in July.
The PMI survey results showed business activity levels rose in July as companies commented on increased inflows of new jobs, projects in progress and improved supply chain conditions.
However, the growth rate slowed for the third consecutive month and is the lowest recorded in the past three years.
S&P Global said that private non-oil demand in the UAE remained strong, with sales increasing rapidly. However, due to intense competition, some companies saw a decline in new orders.
The report highlights that the UAE's non-oil sector attracted international attention in July, with exports rising at the second-fastest pace in nine months.
Amid concerns that clients may turn to competitors, the survey report suggests non-oil companies are often taking on more work than they can handle, S&P Global added.
The survey found that selling prices rose again in July, the second monthly increase being the biggest in more than six years, while seller delivery times also showed signs of improvement.
“Even though delivery times have improved and purchases have increased, companies are being forced to reduce inventory to try to address some of the issues, which could impact growth if inventory levels drop significantly,” Owen said.
Survey participants also expressed confidence in the future growth of non-oil businesses in the UAE over the next 12 months, although sentiment fell to its lowest level since January.
Overall, the PMI shows that the non-oil sector is expanding steadily and could strengthen if companies start to manage their workloads better. Companies are generally optimistic about this, with expectations for next year remaining strong as hiring continues to build to increase employee potential.
In the same report, S&P Global said Dubai's PMI fell to a two-and-a-half year low in July to 52.9 from 54.3 in June.
The report said the slowdown was due to weaker orders in Dubai's non-oil private sector, which was hit by some competitive conditions.
Egypt is entering a growth zone
In another report, S&P Global revealed that Egypt recorded a PMI of 49.7 in July, the second highest level in nearly three years but down slightly from 49.9 in June.
Egypt's non-oil economy remained near the line between growth and contraction in July, with output and new business falling at a modest pace, the U.S.-based agency said.
PMI survey shows employment rose in July, while output rebounds slightly forecast
“Egypt’s economy, excluding oil, remains in the early stages of expansion, with the July PMI just below 50,” Owen said. “While some companies are pointing to a change in economic conditions, particularly with rising export demand, market conditions elsewhere are weak.”
According to S&P Global, price pressures among Egypt's non-oil companies remained low in July compared to a few years ago, but there are clear signs that they are intensifying as input costs rose at their fastest pace since March.
“Inflationary pressures on companies are largely in line with the trend seen in Q2, easing from the upward trend of the past few years,” Owen said.
“However, the slight increase in input cost inflation in July may have some companies concerned about the risk that prices could rise again and impact business activities,” he added.
At the start of Q3, Egypt's non-oil sector reported a slight but sustained contraction in activity levels, weighed down by weaker sales and price pressures. Although the rate of decline accelerated slightly from June, it was the second weakest decline in nearly three years.
The report also said that nearly 9 percent of the surveyed companies reported a decrease in sales, while 7 percent said sales expanded.
On the positive side, new export orders rose for the third consecutive month in July, driven by increased demand for Egypt's non-oil products from overseas markets.
In July, job creation at Egypt's non-oil companies also rose slightly, reversing a small decline in June, with companies hoping the sales decline was short-lived and conditions would improve.
Kuwait's non-oil private sector continues to grow
Kuwait's non-oil private sector starts brightly in second half, boosted by new orders, S&P Global says
Kuwait's PMI in July came in at 51.5, barely changed from 51.6 in June.
“As has been the case for some time, Kuwaiti companies used advertising and competitive pricing to gain new business and boost output in July,” said Andrew Harker, director of economics at S&P Global Market Intelligence.
“Often discounts are offered despite rising input prices and record increases in employee costs,” he added.
The report said new orders continued to rise at a steady pace in July, although growth slowed to a 10-month low.
S&P Global added that new orders from regular customers helped Kuwait’s non-oil companies expand their business activities again in July.
Harker said non-oil companies are struggling to find the right talent to meet growing demand.
“A major challenge for companies in July was finding the right staff, and these difficulties kept hiring steady throughout the month, leading to a continued increase in outstanding business,” Harker said. “Companies will hopefully find it easier to hire in the coming months so they can expand their output and control their workload.”
Kuwait's non-oil firms remain confident output will rise next year, survey finds, although confidence drops to lowest level since February
