Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
The UAE’s non-oil private sector continued to expand in August despite the global turmoil caused by tariff wars, with the seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) registering 53.3, up from 52.9 in July.
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 PMI was partially lifted by a sharper expansion in output levels midway through the third quarter of the year. “In fact, the uplift in activity was the fastest for six months and slightly better than the survey's long-run trend,” the report noted. Panellists noted that higher sales intakes, ongoing project work and growth in local markets underpinned the upturn.
The uptick in PMI was reported despite signals about weakened demand and decline in purchase of inputs by firms. “With demand momentum easing, non-oil businesses made cuts to their input purchases over the course of August,” the PMI report noted. Buying quantities fell for the first time in just over four years, leading to another contraction in stocks of purchases, the report noted.
The seasonally adjusted New Orders Index dropped to its lowest level since June 2021, indicating a softer rise in company sales. Competitive pressures were often highlighted, while some firms cited that supply chain challenges had made it harder to complete sales.
The report also noted a rise in outstanding business volumes in August. “The survey data signalled another sharp increase in backlogs, which has generally been the case since early 2024,” the report noted.
The input inflation has risen to the highest level since February, the report noted. “The chief driver of growing cost pressures was wages, which many companies raised due to cost-of-living pressures and performance incentives,” the report noted. But the fall in demand for purchased goods led to a easing of purchase price inflation.
“While purchase price inflation came down in August, this was counteracted by an upsurge in wage inflation as recruitment activity remained healthy and cost-of-living rises drove salary demands higher,” noted David Owen, Senior Economist at S&P Global Market Intelligence.
“Selling prices also rose at a quicker pace in August, which may become a concern for consumers if the trend continues.”
The report noted that non-oil companies raised their selling charges. Though modest, the rate of increase was the sharpest in five months.
Output expectations improved in August. “Several companies cited hopes that stable domestic economic conditions and strong client relationships would help to sustain growth in the year ahead,” the S&P report said.
Dubai PMI
Business conditions in Dubai saw another solid improvement in August. The Dubai PMI posted 53.6 in August, up slightly from 53.5 in July, signaling “a robust upturn in the health of the non-oil private sector economy”.
“Businesses expanded their output at the sharpest rate for seven months in August, underlined by increased client sales and project activity,” the report noted.
Total order books also grew, albeit to a lesser extent than that seen in July. But the report also flagged quickest contraction in inventories of inputs.
