Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
The UAE’s non-oil private sector remained in expansionary territory in June, with the seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) at 50.8, supported by resilient domestic spending, public investment and an improvement in supply-chain conditions.
The PMI eased from 52.6 in May but stayed above the 50 mark that separates expansion from contraction, indicating continued improvement in operating conditions despite regional geopolitical disruptions and pressure on client activity.
The S&P Global UAE PMI report said: “While resilient domestic spending and public investment growth supported firms, the broader economy faced further headwinds from geopolitical disruptions.”
The report said firms surveyed in June cited construction projects, digital services expansion and robust sales pipelines as pockets of strength in the non-oil private sector.
New business growth accelerated to a three-month high, although it remained below the historical average as some customers delayed spending decisions. The report also noted that tourism sector weakness and elevated price pressures weighed on demand.
After contracting in May, purchasing activity at UAE non-oil businesses rebounded sharply in June. “The upturn was linked to both sales-related restocking and defensive procurement strategies as firms sought to build buffer inventories against potential material shortages,” the report said.
Supply-chain performance also improved during the month. The report said delivery times improved at the fastest rate in four months as an easing of shipping bottlenecks in the Strait of Hormuz allowed supply chains to recover.
Input cost pressures persisted, with companies reporting higher purchasing expenses linked to transport fees and commodity inflation. Firms raised their selling prices modestly in June, but the increase in output charges was much softer than the rise in input costs.
“Survey evidence showed that firms were often willing to eat into margins in order to soften the impact of rising competition,” the report said.
Although output growth softened in June, business expectations remained solidly optimistic. The report said panellists often cited confirmed contract work or exposure to public sector spending as reasons to be confident, while firms more dependent on external conditions expressed some caution.
The report said staff numbers declined in June as companies moved to control costs and improve productivity. It said the reduction in staffing helped companies stabilise wage costs for the first time in nearly three-and-a-half years.
David Owen, Principal Economist at S&P Global Market Intelligence, said recent moves towards an easing of geopolitical tensions in the region should help firms recover demand and normalise supply chains.
“Looking ahead, recent moves towards an easing of geopolitical tensions in the region should help firms recover demand and normalise supply chains – indeed, the greater movement of shipping along the Strait of Hormuz in June led to shorter delivery times,” Owen said.
He added that client caution had persisted so far and that businesses had moved to cut staff capacity, suggesting that a rebound in the non-oil sector may be gradual.
Dubai PMI
Dubai-based firms also continued to report an improvement in business conditions in June. The Dubai PMI stood at 50.7, down from 52.0 in May, remaining above the neutral 50 mark.
Dubai firms registered a modest rise in new business, though sales growth was affected by continued spending delays and reductions in travel due to the regional conflict. Businesses raised output in June, with the rate of expansion picking up to the fastest since March, the report said.
