RIYADH: Growth in the UAE's non-oil private sector held steady in July, but showed its slowest recovery in three years, an economic tracker showed.
According to the S&P Global Purchasing Managers' Index, the UAE PMI fell to 53.7 in July from 54.6 in the previous month as competitive conditions, increased price pressures and capacity overload weighed on performance.
In July, the index was also below its long-term average of 54.4, but remained above the 50 expansion mark.
“The drop in the UAE PMI is another signal that non-oil sector growth is on the downside in 2024,” said David Owen, chief economist at S&P Global Market Intelligence.
“Business capacity remains one of the key challenges facing the sector, as evidenced by another sharp increase in backlogs as companies struggled to resolve supply and administrative issues,” he added.
In March, UAE Economy Minister Abdullah Bin Towq said the UAE economy is expected to grow by 5% this year, driven by strong development in the non-oil sector and increased foreign direct investment.
The interior minister also said that the non-oil economy of the UAE currently accounts for 73% of the country's gross domestic product.
According to S&P Global, price inflation accelerated in July and companies experienced the fastest increase in input costs in two years.
Higher input prices were once again partly passed on to consumers as production costs rose for a third straight month in July, the finance agency revealed.
The PMI survey showed that the level of business activity rose further in July, as companies commented on increased new work flows, ongoing projects and improved supply chain conditions.
This expansion rate, however, decreased for the third consecutive month and was the lowest rate recorded in the last three years.
S&P Global announced that demand conditions in the UAE's non-oil private sector remain favorable and sales have increased sharply. However, due to intense competition, some companies saw a decline in new order volumes.
The report also highlighted that the UAE's non-oil trade attracted international appetite in July, with exports growing at the second-fastest pace in nine months.
S&P Global added, with concerns that customers could switch to competitors, survey reports show that non-oil companies are often doing more than their own management.
Sales prices rose again in July, rising to a more than six-year record for the second month, the survey showed, while dealer delivery times showed signs of improvement.
“Although delivery times are improving and purchases are increasing, companies have had to dip into their stocks to resolve some of these issues, which could act as a headwind to growth if inventory runs low,” Owen said.
Survey respondents also expressed optimism about future growth for non-oil businesses in the UAE over the next 12 months, although their confidence fell to its weakest level since January.
“Overall, the PMI shows that the non-oil sector is expanding strongly and could be boosted if companies start doing their jobs,” Owen said. remained strong, while hiring continued in an effort to increase staff capacity.
In the same report, S&P Global said Dubai's PMI fell to a two-and-a-half-year low of 52.9 in July from 54.3 in June.
According to the report, the softer growth was due to lower orders in Dubai's non-oil private sector, which was somewhat affected 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 down slightly from 49.9 in June.
The US-based agency said Egypt's non-oil economy hovered close to the line between growth and contraction in July, with output and new trade falling at marginal rates.
The PMI survey added that employment grew in July while manufacturing expectations improved slightly.
“Egypt's non-oil economy appears to remain on the cusp of growth, with the July PMI not far from the 50 mark,” Owen said. While some companies pointed to a turning tide in economic conditions, particularly through increased export demand, market conditions elsewhere were reported to be weak.
Price pressures among Egypt's non-oil companies were lower than in two years in July, but showed tentative signs of intensifying as input costs rose at their sharpest pace since March, S&P Global reported.
“Corporate inflationary pressures are largely following the trend seen in the second quarter, which has eased compared to rising rates in recent years,” Owen said.
“However, the slight increase in input cost inflation in July could make some companies worried about the risk of price increases again and limiting business activities,” he added.
At the start of the third quarter, Egypt's non-oil companies reported a slight but persistent contraction in activity levels, driven by weakening sales and price pressures. Although the rate of decline accelerated slightly from June, it was the second weakest in nearly three years.
The report adds that roughly 9 percent of companies surveyed reported a decline in sales, while 7 percent reported an increase in sales.
On the positive side, new export orders rose for the third consecutive month in July, driven by improved demand for Egypt's non-oil goods from foreign markets.
In July, job creation at Egypt's non-oil firms also rose slightly, reversing a deficit reduction in June, as firms hoped the sales decline would be brief and conditions would improve.
Kuwait's non-oil private sector continues to move
S&P Global revealed that the non-oil private sector in Kuwait had a positive start to the second half of the year, driven by an increase in new orders.
Kuwait's PMI came in at 51.5 in July, almost unchanged from 51.6 in June.
Andrew Harker, chief economist at S&P Global Market Intelligence, said: “As has been the case for some time, companies in Kuwait were able to use promotions and competitive prices to secure new business and expand production in July.
He added: Despite the increase in the price of inputs, discounts were often offered, including an unprecedented increase in staff costs.
According to the report, new orders rose at a steady pace in July despite the growth rate slowing to a 10-month low.
S&P Global added that new orders from regular customers helped Kuwait's non-oil companies expand business activity again in July.
Harker said non-oil companies are having trouble finding the right talent to meet growing demand.
“A key challenge for companies in July was finding the right skilled workers, and these problems meant that employment remained flat throughout the month, leading to more prominent business,” says Harker. “Companies hope to make it easier to increase employment in the coming months so that they can increase their productivity and continue their workload.”
The survey showed that non-oil companies in Kuwait are confident that output will increase next year, although sentiment has fallen to the lowest since February.
