RIYADH: Growth in the UAE's non-oil private sector remained steady in July but marked the slowest improvement in nearly three years, an economic tracker 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 output.
In July, the index was also below its long-term average of 54.4, but remained firmly above the 50 mark.
David Owen, chief economist at S&P Global Market Intelligence, said: “The fall in the 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 evidenced by another sharp rise in backlogs as firms struggled to deal with supply and administrative issues.”
In March, UAE Economy Minister Abdullah bin Touk said the Emirati economy was expected to grow by 5 percent this year, driven by a strong expansion of the non-oil sector and increased foreign direct investment.
The minister also said that the UAE's non-oil economy currently accounts for 73 percent of the country's gross domestic product.
Price inflation accelerated further in July, with companies experiencing the fastest rise in input costs in exactly two years, according to a report from S&P Global.
The finance agency showed that higher resource prices were again partially passed on to customers as output fees 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 the increase in the inflow of new work, ongoing projects and improving conditions in the supply chain.
That pace of expansion, however, slowed for the third consecutive month and was the slowest in three years.
S&P Global said demand conditions in the UAE's non-oil private sector remained favorable, with sales rising sharply. However, due to strong competition, some firms saw a drop in new orders.
The report also highlighted that the UAE's non-oil businesses sparked international appetite in July, with exports growing at the second fastest pace in nine months.
Amid concerns that customers could switch to rivals, survey reports showed that non-oil companies are often taking on more work than they can handle, S&P Global added.
The survey said selling prices rose again in July, with growth hitting a more than six-year record for a second straight month, while supplier delivery times showed signs of improvement.
“Even though delivery times are improving and purchases are picking up, firms have been forced to dig into their inventories to try to address some of these issues, which can be a drag on growth when inventories are noticeably depleted,” Owen said.
Survey respondents were also optimistic about the future growth of non-oil businesses in the UAE over the next 12 months, although their confidence fell to the lowest level since January.
“Overall, the PMI suggests that the non-oil sector is expanding steadily and could strengthen as companies begin to manage their workloads,” Owen said, adding: “Firms are generally upbeat, with confidence in the year ahead. remaining strong, while recruitment also continued in an attempt 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 low orders in Dubai's non-oil private sector, which was partly dampened by competitive conditions.
Egypt is moving into growth territory
In another report, S&P Global showed that Egypt's PMI came in at 49.7 in July, the second highest in nearly three years, but marginally lower than June's 49.9.
The US agency said Egypt's non-oil economy hovered close to the boundary between growth and contraction in July, with output and new business declining at a modest pace.
The PMI survey added that employment rose in July, while output expectations rebounded slightly.
“Egypt's non-oil economy still appears to be on the cusp of expansion, with July's PMI not above 50,” Owen said. “While some firms pointed to a turnaround in economic conditions, particularly through increased export demand, market conditions were described as weak elsewhere.”
Pricing pressures among Egyptian non-oil companies remained low in July compared with the past few years, but showed preliminary signs of strengthening as production costs rose at their fastest pace since March, according to S&P Global.
“Inflationary pressures on firms were broadly in line with the trend seen in the second quarter, which was subdued compared to the increased pace of recent years,” Owen said.
“However, a slight pick-up in resource inflation in July may cause some firms to worry about the risk that prices will rise again and hold back business activity,” he added.
At the start of the third quarter, non-oil businesses in Egypt reported a slight but steady decline in activity, driven by weaker sales and price pressures. While that 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 reported an increase.
On a positive note, new export orders increased for the third consecutive month in July, driven by increased demand for Egyptian non-oil products from foreign markets.
Job creation at Egyptian non-oil companies also picked up in July, overcoming a fractional decline in June, as companies hoped that the sales slump would be short-lived and that conditions would improve.
Kuwait's non-oil private sector remains buoyant
S&P Global showed that the non-oil private sector in Kuwait started the second half of the year on a positive note, thanks to a rise in new orders.
Kuwait's PMI stood at 51.5 in July, broadly unchanged from 51.6 in June.
“As has been the case for some time, firms in Kuwait 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: “Discounts were often offered despite rising material costs, including record increases in staffing costs.”
According to the report, new orders continued to grow at a strong pace in July, despite the rate of growth slowing to a 10-month low.
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 have struggled to find the right talent to meet growing demand.
“Finding suitably qualified staff was the main challenge for companies in July and these difficulties meant that employment was flat during the month, leading to further build-up of excellent business,” Harker said. “Firms will be hoping that it will be easier for them to increase their headcount in the coming months so that they can increase output and keep up with workloads.”
The survey said non-oil companies in Kuwait remained confident that output would pick up next year, although sentiment fell to its lowest level since February.
