Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
The UAE’s non-oil private sector continued to expand in June despite heightened regional tensions, with the seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) registering 53.5, up from 53.3 in May.
The PMI is a key economic indicator measuring business activity in the manufacturing and services sectors. A reading above 50 signals expansion, while a reading below 50 indicates contraction.
The modest uptick in the PMI masked diverging trends among the index's sub-components, as a softening in new business growth was offset by a quicker expansion in output and a stabilisation of inventories.
“UAE non-oil private sector businesses experienced a slowdown in demand at the end of the second quarter, as rising tensions made clients hesitant to spend,” the S&P Global report said. But input cost pressures eased, mitigating the impact of the slowdown in demand, the report said.
While non-oil businesses reported a solid rise in new order intakes, the rate of growth eased and was the weakest since September 2021, the report observed.
Survey panellists said that promotion-driven sales and an expanding client base also contributed to offsetting the impact of the slowdown in demand.
Businesses used the uncertain period to clear outstanding work. “Firms were able to turn their attention to addressing the substantial level of outstanding work — evidenced since early 2024 — the impact on overall business conditions was negligible. In fact, the PMI actually rose slightly in June.
Increased efforts to complete backlogs meant that output growth quickened, while the decline in stock levels was halted after a record slump in May,” observed David Owen, Senior Economist at S&P Global Market Intelligence.
Despite the softening in sales growth, UAE non-oil firms increased their output more strongly than in the previous month. “This implied clearance of some outstanding work, resulting in slowing growth of the backlog work in 17 months,” the report observed.
Businesses continued to purchase stocks despite facing shipping and customs challenges. “This allowed firms to prevent a further decline in their inventories, as stocks of purchased inputs were relatively stable after decreasing at a record pace in the previous month,” the report noted.
Employment rose modestly in June, with non-oil firms expanding their workforce to ease pending workloads. Hiring picked up, reversing the trend seen during the first quarter, the report added.
Input costs rose at their slowest pace in nearly two years. “The rate of input cost inflation was the lowest seen in nearly two years, which allowed firms to offer discounts to customers. With consumer price pressures appearing limited, the latest data suggests that a rebound in sales growth is wholly possible in the coming months,” observed Owen.
UAE non-oil firms remained relatively subdued in their outlook, although the level of confidence edged up to its highest since last November. “Projected sales growth and an easing of geopolitical tensions were the main drivers of positivity,” the report observed.
Dubai PMI
Non-oil private sector companies in Dubai reported a slight increase in new order volumes in June. Many firms noted that competitive pressures and weaker tourism—due to heightened regional tensions—had impacted overall levels of new work.
“Nevertheless, business activity rose sharply in June, with the pace of expansion matching that seen in May. Workforce numbers increased for the third consecutive month,” the report said.
The latest data also indicated a rise in output prices for the seventh month in a row. “However, the increase slowed and was modest, supported by a further easing of input cost pressures. The rate at which costs rose was the weakest in 18 months,” the report observed.
