RIYADH: Growth in the UAE's non-oil private sector held steady in July but saw the slowest improvement in nearly three years, an economy tracker showed.
According to the S&P Global Purchasing Managers' Index, Emirates' PMI fell to 53.7 in July from 54.6 the previous month as competitive conditions, rising price pressures and capacity overload weighed on performance.
In July, the index was also below its long-term average of 54.4 but remained strong above the 50 extension mark.
David Owen, chief economist at S&P Global Market Intelligence, said: “The drop in the UAE PMI is a further indication that growth in the non-oil sector is on a downward trend in 2024.”
He added: “Business capacity remains one of the key challenges facing the sector, as indicated by another large increase in backlogs as companies struggle to resolve supply and administrative issues.”
In March, UAE Finance Minister Abdullah bin Touk said the emirate's economy is expected to grow by 5 percent this year, driven by strong 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 percent of the nation's gross domestic product.
Price inflation rose further in July, with companies experiencing the fastest increase in input costs for exactly two years, according to the S&P Global Report.
The financial agency revealed that higher input prices were partly passed on to customers as output charges rose for the third month running in July.
The PMI survey revealed that levels of business activity rose further in July, as companies commented on an increased flow of new work, ongoing projects, and improved supply chain conditions.
This rate of expansion, however, eased for the third consecutive month and was the lowest recorded in the last three years.
S&P Global said demand conditions in the UAE non-oil private sector were favorable, with sales rising sharply. However, some firms saw a decline in new order volumes due to heavy competition.
The report also highlighted that the UAE's non-oil business attracted international appetite in July, with exports growing at the second fastest pace in nine months.
With concerns that customers might switch to rivals, survey reports indicated that non-oil companies often took on more than they could manage, S&P Global added.
The survey showed sales prices rose again in July, rising for the second month to a record in more than six years, while seller delivery times showed signs of improvement.
“Although delivery times are improving and purchases are increasing, firms are forced to dip into their stock to try and resolve some of these issues, which could act as a headwind to growth if inventories fall significantly,” Owen said.
Survey participants also expressed optimism about the future growth of non-oil businesses in the UAE over the next 12 months, although their confidence fell to the weakest level since January.
“Overall, the PMI suggests that the non-oil sector is expanding strongly and could strengthen if companies start to get on top of their workloads,” Owen said, adding, “Companies are generally optimistic, with confidence in the year ahead. Remain strong, while employee capacity Recruitment also continued in an effort to increase.”
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, down from 54.3 in June.
According to the report, Dubai's non-oil private sector saw a modest rebound due to lower orders, partially offset by competitive conditions.
Egypt is moving towards a growth area
In another report, S&P Global found that Egypt recorded a PMI of 49.7 in July, the second highest in nearly three years, but marginally lower than 49.9 in June.
The US-based agency said Egypt's non-oil economy was close to the line between growth and contraction in July, with output and new business falling at a marginal rate.
The PMI survey showed employment rose in July while output expectations improved slightly.
“Egypt's non-oil economy still appears to be on the cusp of expansion, with July's PMI just shy of the 50 mark,” Owen said. “While some firms pointed to a turning of the tide in economic conditions, particularly through rising export demand, market conditions were said to be weak elsewhere.”
Price pressures among Egypt's non-oil firms remained lower in July than in the past two years but showed tentative signs of intensifying as input costs rose at their fastest pace since March, according to S&P Global.
“Inflationary pressures on firms largely followed the trend seen in the second quarter, which has slowed compared to the rate of growth in recent years,” Owen said.
“However, a slight increase in input cost inflation in July may make some firms concerned about the risk of prices rising again and disrupting business activity,” he added.
At the start of the third quarter, Egypt's non-oil businesses reported a small but sustained contraction in activity levels, driven by weaker sales and price pressures. Although the pace of decline picked up slightly from June, it was the second weakest in nearly three years.
The report added that about 9 percent of surveyed firms reported a decline in sales, while 7 percent noted an expansion.
On a positive note, new export orders saw growth for the third consecutive month in July, due to improved demand for Egyptian non-oil goods from foreign markets.
In July, job creation at Egypt's non-oil firms also saw a slight increase, reversing a partial decline in June, as companies hoped the dip in sales would be short and conditions would improve.
Kuwait's non-oil private sector has maintained momentum
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 stood at 51.5 in July, broadly unchanged from June's 51.6.
“As has been the case for some time, Kuwaiti firms were able to secure new business and expand production in July through advertising and competitive pricing,” said Andrew Harker, director of economics at S&P Global Market Intelligence.
He added: “Most of the concessions were offered despite rising input prices, including record increases in labor costs.”
According to the report, new orders continued to grow at a solid pace, although growth eased to a 10-month low in July.
S&P Global added that new orders from regular customers helped Kuwaiti non-oil companies expand business activity again in July.
Harker said non-oil companies face difficulties finding the right talent to meet growing demand.
“A key challenge for firms in July was finding suitably skilled staff, and these difficulties meant that employment was unchanged during the month, resulting in further build-up of outstanding business,” Harker said. “Firms will hope that it will be easier to increase employment in the coming months so that they can expand production and keep on top of workloads.”
The survey said Kuwait's non-oil firms were confident output would rise in the coming year, although sentiment was the lowest since February.
