RIYADH: Growth in the UAE's non-oil private sector was flat in July but marked the slowest improvement in nearly three years, an economy monitor showed.
According to the S&P Global Purchasing Managers Index, the Emirates PMI fell to 53.7 in July from 54.6 the previous month as competitive conditions, rising price pressures and overcapacity weighed on performance.
In July, the index was also below its long-term average of 54.4, but remained well above the expansion threshold of 50.
David Owen, chief economist at S&P Global Market Intelligence, said: “The drop in UAE PMI is another signal that non-oil sector growth is on a downward trend in 2024.”
He added: “Business capacity remained one of the key challenges facing the sector, as shown by another steep rise in backlogs as firms struggled to resolve administrative and supply issues.”
In March, UAE Economy Minister Abdulla bin Touq said the Emirati economy is expected to grow by 5 percent this year, driven by robust expansion in the non-oil sector and an increase in foreign direct investment.
The minister also said that the UAE's non-oil economy currently accounts for 73% of the nation's gross domestic product.
According to the S&P Global report, price inflation accelerated further in July, with companies posting the fastest increase in input costs in exactly two years.
The finance agency revealed that higher input prices were again partially passed on to customers as output charges rose for the third consecutive month in July.
The PMI survey showed that the level of business activity rose further in July as companies commented on rising flows of new work, ongoing projects and improved supply chain conditions.
This rate of expansion, however, fell for the third month in a row and was the lowest recorded in the last three years.
S&P Global said demand conditions in the UAE's non-oil private sector remained favorable, with sales picking up sharply. However, due to strong competition, some firms experienced a decline in new order volumes.
The report also highlighted that the UAE's non-oil businesses attracted international appetite in July, with exports growing at the second-fastest pace in nine months.
With concerns that clients could switch to rivals, survey reports indicated that non-oil companies often took on more work than they could handle, S&P Global added.
The survey showed selling prices rose again in July, with growth hitting a more than six-year high for the second month, while supplier delivery times showed signs of improvement.
“Although delivery times are improving and purchases are increasing, firms have been forced to dip into inventories to try to address some of these issues, which could act as a headwind to growth if stocks are visibly depleted,” Owen said .
Survey participants also showed optimism about future growth in the UAE's non-oil businesses over the next 12 months, although their confidence fell to its weakest level since January.
“Overall, the PMI suggests that the non-oil sector is expanding solidly and could strengthen if companies start to outpace their workloads,” Owen said, adding: “Overall, firms are optimistic about this , with confidence in the coming year. remaining strong, while hiring also continued in a bid to increase staff capacity.”
In the same report, S&P Global said Dubai's PMI fell to its lowest level in two-and-a-half years in July to 52.9 from 54.3 in June.
According to the report, the softer growth was due to lower orders from Dubai's non-oil private sector, which was partially mitigated by competitive conditions.
Egypt is moving into growth territory
In another report, S&P Global revealed that Egypt posted a PMI of 49.7 in July, the second highest in nearly three years, but slightly lower than June's 49.9.
The US-based agency said Egypt's non-oil economy held close to the boundary between growth and contraction in July, with output and new business falling at marginal rates.
The PMI survey added that employment rose in July, while manufacturing expectations rebounded slightly.
“Egypt's non-oil economy still appears to be on the brink of expansion, with July's PMI coming in just below 50,” Owen said. “While some firms indicated a turning tide in economic conditions, particularly through increased export demand, market conditions were reported as weak elsewhere.”
Price pressures among Egyptian non-oil firms remained subdued in July compared with the past two years, but showed tentative signs of intensifying as input costs rose at their steepest pace since March, according to S&P Global.
“Inflationary pressures on firms have largely followed the trend seen in the second quarter, which has been subdued compared to the increased rates of recent years,” Owen said.
“However, a slight pick-up in input cost inflation in July could make some firms concerned about the risk of prices rising again and curtailing business activity,” he added.
At the start of the third quarter, non-oil businesses in Egypt reported a slight but persistent decline in activity levels, driven by lower sales and price pressures. Although this pace of decline accelerated slightly from June, it was the second weakest in nearly three years.
The report added that nearly 9 percent of surveyed firms reported a decline in sales, while 7 percent saw an expansion.
On a positive note, new export orders rose for the third consecutive month in July as demand for Egyptian non-oil goods from foreign markets increased.
In July, job creation at Egyptian non-oil firms also rose slightly, reversing a fractional decline in June, as companies hoped the sales slump would be brief and conditions would improve.
Kuwait's non-oil private sector maintains momentum
S&P Global revealed that Kuwait's non-oil private sector had a positive start to the second half of the year, boosted by an increase in new orders.
Kuwait's PMI in July was 51.5, largely unchanged from 51.6 in June.
“As has been the case for some time, Kuwaiti firms were able to use advertising and competitive pricing to secure new business and expand production in July,” said Andrew Harker, chief economist at S&P Global Market Intelligence.
He added: “Rebates were often offered despite rising input prices, including a record rise in staffing costs.”
According to the report, new orders continued to grow at a solid pace in July, despite the rate of growth falling to the slowest in 10 months.
S&P Global added that new orders from regular customers helped Kuwait's non-oil companies expand again in July.
Harker said non-oil firms were having trouble finding the right talent to meet the growing demand.
“A key challenge for firms in July was finding suitably qualified staff, and these difficulties meant that employment was flat during the month, leading to further growth in outstanding business,” Harker said. “Firms will be hoping that it will be easier for them to increase employment in the coming months so they can expand production and keep up with workloads.”
The survey showed that non-oil firms in Kuwait remained confident that output would rise next year, although sentiment fell to its lowest level since February.
