Today's Edition
A.SREENIVASA REDDY (ABU DHABI)
The non-oil private sector of the UAE’s economy continues to be in a robust expansionary mode with the seasonally-adjusted S&P Global UAE Purchasing Managers’ Index (PMI) positioned at 53.7 in the month of July.
Though the July PMI is less than that of June (54.4), the metric indicates the UAE non-oil private sector has persisted with its growth ambitions despite challenges.
“Business activity levels rose further in July due to rising inflows of new work, ongoing projects and improved supply chain conditions,” the S&P Global report said.
The PMI is a survey-based economic indicator that gives an insight into the prevailing business conditions.
The PMI is calculated by surveying purchasing mangers from a variety of industries.
These managers provide information on several key areas including new orders, production levels, employment, delivery times, inventories and purchasing prices.
All these responses are aggregated into a number based a weightage given to each factor.
A PMI above 50 indicates expansion while a reading below 50 indicates contraction.
The PMI sends signals about the direction of the economy much before the other indicators such as GDP and employment rates.
The PMI of 53.7 indicates the UAE non-oil sector continued its expansion.
“The overall PMI suggests that the non-oil sector is expanding solidly and could be strengthened if companies start to get on top of their workloads,” commented David Owen, Senior Economist at S&P Global Market Intelligence.
“Firms are generally optimistic, with the confidence in the year ahead remaining strong, while hiring also continued in a bid to raise staff capacity.”
The July PMI of 53.7, which is way below 54.4 recorded for the month of June, indicated challenges facing the non-oil sector.
“While rising customer demand continued to support growth of activity, firms desire to retain clients coupled with ongoing capacity challenges led to another sharp increase in outstanding work, which also resulted in a decrease in inventories for the first time since late 2020,” the S&P Global report said.
The rising costs is another challenge facing the non-oil sector in the UAE.
“Price inflation increased further with companies experiencing fastest rise in input costs for over two years with the costs being passed on to customers,” the report said.
The rate of input price inflation was the fastest observed in two years, having quickened in each of the past four months, the survey report said.
Higher material prices were often behind price pressures, according to firms, although increases in wages and other overhead costs were also cited.
The survey shows vendor delivery times continued to improve at a robust pace in July.
Lead times were often reduced in line with firms’ requests for faster deliveries.
Looking ahead, non-oil companies tended to predict that improving economic conditions will continue over the next 12 months, although the degree of confidence slipped to the weakest since January.
Dubai PMI The Dubai PMI dropped to 52.9 in July from 54.3 in June indicating slower improvement in the health of non-oil private sector.
Non-oil firms reduced their stocks of purchases in July amid reports of rising prices of materials and the need to utilise the existing stocks.
Input costs increased in the fastest pace in recent time leading to escalation of output costs.
‘The overall PMI suggests that the non-oil sector is expanding solidly and could be strengthened if companies start to get on top of their workloads.’
The survey shows vendor delivery times continued to improve at a robust pace in July.
Lead times were often reduced in line with firms’ requests for faster deliveries
