RIYADH: The UAE's non-oil private sector growth remained steady in July but marked its slowest improvement in nearly three years, an economy tracker showed.
According to the S&P Global Purchasing Managers' Index, the Emirates PMI fell to 53.7 in July from 54.6 the previous month as competitive conditions, rising price pressures and capacity congestion weighed on results.
In July, the index was also below its long-term average of 54.4 but held firmly above the 50 expansion mark.
David Owen, chief economist at S&P Global Market Intelligence, said: “The decline in the UAE PMI is another signal that growth in the non-oil sector is on a downward trend in 2024.”
He added: “Business capacity remained one of the key challenges for the sector, as indicated by another steep rise in backlogs as companies struggled to resolve supply and administrative issues.”
In March, UAE Economy Minister Abdulla bin Touq said the Emirates economy is expected to grow 5 percent this year, driven by robust expansion in the non-oil sector and a surge in foreign direct investment.
The minister also said that the UAE's non-oil economy currently accounts for 73 percent of the country's gross domestic product.
According to the S&P Global report, price inflation accelerated further in July, with companies experiencing the fastest increase in input costs in exactly two years.
The Treasury revealed that higher input prices were again partly passed on to customers, as output charges rose for the third consecutive month in July.
The PMI survey revealed that business activity levels rose further in July, as companies commented on increasing inflows of new work, ongoing projects and improved supply chain conditions.
However, this rate of expansion slowed for the third consecutive month and was the lowest recorded in the past three years.
S&P Global said demand conditions in the UAE's non-oil private sector remained favorable, with a strong increase in sales. However, due to intense competition, some companies saw a decrease in new order volumes.
The report also highlighted that the UAE's non-oil businesses attracted international appetite in July, with exports rising at the second-fastest pace in nine months.
With concerns that customers could switch to competitors, survey reports showed that non-oil companies often took on more work than they could handle, S&P Global added.
The survey said sales prices rose again in July, with the gain hitting an over six-year record for the second month, while delivery times from suppliers showed signs of improvement.
“Although delivery times are improving and purchases are rising, companies have had to dip into their inventories to try to solve some of these issues, which can act as a headwind to growth if inventories are noticeably depleted,” says Owen.
Survey participants also showed optimism about the future growth of non-oil companies in the UAE over the next 12 months, although their confidence fell to the weakest level since January.
“Overall, the PMI suggests that the non-oil sector is expanding strongly and could strengthen if companies start to get over their workloads,” Owen said, adding: “Businesses are generally upbeat about this, with confidence in the coming year remaining strong, while hiring continued in an attempt to increase staff capacity.”
In the same report, S&P Global said Dubai's PMI fell to its lowest level in two and a half years in July to 52.9 from 54.3 in June.
According to the report, a softer recovery was due to low order intake in Dubai's non-oil private sector, which was partly dampened by competitive conditions.
Egypt is moving towards growth territory
In another report, S&P Global revealed that Egypt recorded a PMI of 49.7 in July, the second highest in nearly three years, but marginally lower than June's 49.9.
The US-based agency said Egypt's non-oil economy hovered near the boundary between growth and contraction in July, with output and new business declining at a marginal pace.
The PMI survey added that employment grew in July while output expectations rebounded slightly.
“The Egyptian non-oil economy still appears to be on track to expand, with the July PMI just shy of the 50 mark,” says Owen. “While some companies pointed to a turning of the tide in economic conditions, particularly through rising export demand, market conditions were cited as weak elsewhere.”
According to S&P Global, price pressure among Egyptian non-oil companies remained low in July compared with recent years but showed tentative signs of intensifying as input costs rose at their steepest pace since March.
“Inflationary pressures on businesses broadly followed the trend seen in the second quarter, which has been subdued compared to the increased prices of recent years,” Owen said.
“However, a small increase in input cost inflation in July may have some companies concerned about the risk of prices picking up again and limiting business activity,” he added.
At the start of the third quarter, non-oil businesses in Egypt reported a slight but sustained decline in activity levels, driven by weaker sales and price pressures. Although this rate of decline accelerated slightly from June, it was the second weakest in nearly three years.
The report added that nearly 9 percent of the companies surveyed reported a decline in sales, while 7 percent noted an expansion.
On a positive note, new export orders rose for the third consecutive month in July, driven by improved demand for Egyptian non-oil products from foreign markets.
In July, employment at Egyptian non-oil firms also posted a slight rebound, reversing a fraction of June's decline, as firms hoped the slump in sales would be short and conditions would improve.
Kuwait's non-oil private sector is keeping pace
S&P Global revealed that the non-oil private sector in Kuwait started the second half of the year positively, driven by an increase in new orders.
Kuwait's July PMI stood at 51.5, largely unchanged from June's 51.6.
“As has been the case for some time now, companies in Kuwait were able to use advertising and competitive pricing to secure new business and expand production during July,” said Andrew Harker, chief economist at S&P Global Market Intelligence.
He added: “Rebates were often offered despite rising input prices, including record staff costs.”
According to the report, order intake continued to increase at a good pace in July despite the growth rate easing to a 10-month low.
S&P Global added that new orders from regular customers helped Kuwaiti non-oil companies expand business activity again in July.
Harker said non-oil companies were struggling to find the right talent to meet the growing demand.
“A key challenge for businesses in July was finding suitably skilled staff, and these difficulties meant that employment was flat during the month, resulting in a further build-up of outstanding business,” said Harker. “Companies will be hoping that it will be easier to increase employment in the coming months so that they can expand production and keep track of workloads.”
The survey said non-oil companies in Kuwait remained confident that output will rise in the coming year, although sentiment eased to the lowest since February.
