RIYADH: Growth in the UAE's non-oil private sector remained steady in July but posted 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 capacity congestion weighed on performance.
In July, the index was also below its long-term average of 54.4, but remained firmly above the 50 expansion mark.
David Owen, chief economist at S&P Global Market Intelligence, said: “The decline in the UAE PMI is another signal that non-oil sector growth is on a downward trend in 2024.”
He added: “Trading capacity remained one of the key challenges facing the sector, as indicated by a further steep rise in the order backlog as firms grappled with supply and administrative issues.”
In March, UAE Economy Minister Abdulla bin Touq said the Emirati economy was expected to grow by 5 percent this year, thanks to a massive 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 country's gross domestic product.
According to a report by S&P Global, price growth accelerated further in July, with firms recording the fastest growth in input costs in exactly two years.
The financial agency revealed that higher input prices were again partially passed on to customers when output prices rose for the third consecutive month in July.
The PMI survey revealed that the level of business activity rose further in July as companies commented on the increasing inflow of new work, ongoing projects and improved supply chain conditions.
However, this pace of expansion moderated 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 and sales rose sharply. However, due to strong competition, some companies experienced a decrease in the volume of new orders.
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 might switch to competitors, survey reports suggested that non-oil companies often took on more work than they could handle, S&P Global added.
The survey said selling prices rose again in July, with the increase hitting a more than six-year record for the second straight month, while supplier delivery times showed signs of improvement.
“Although delivery times are improving and purchases are increasing, firms have been forced to reach into their inventories to try to address some of these issues, which could act as a headwind to growth if inventories become noticeably depleted,” Owen said.
Survey respondents 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 lowest level since January.
“Overall, the PMI suggests that the non-oil sector is expanding solidly and could be strengthened if companies start to exceed their workloads,” Owen said, adding: “Firms are generally upbeat on this, with confidence in the year ahead. remained strong while continuing to recruit 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 in July to 52.9 from 54.3 in June.
According to the report, the milder rise was due to low orders in Dubai's non-oil private sector, partly dampened by competitive conditions.
Egypt is approaching 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 marginally down from 49.9 in June.
The US-based agency said Egypt's non-oil economy hovered near the boundary between growth and contraction in July, with output and new business falling at a marginal 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 registering just above 50,” Owen said. “While some firms pointed to a turnaround in economic conditions, particularly due to rising export demand, elsewhere market conditions were reported as weak.”
According to S&P Global, price pressures among Egyptian non-oil firms remained subdued in July compared with the past few years, but showed preliminary signs of strengthening as input costs rose at their sharpest pace since March.
“Inflationary pressures on firms largely followed the trend seen in the second quarter, which was muted compared to the rate hikes of recent years,” Owen said.
“However, a slight acceleration in input cost inflation in July could raise concerns among some firms about the risk of price increases again and reduced business activity,” he added.
At the start of the third quarter, non-oil businesses in Egypt reported a slight but persistent reduction in activity levels, driven by weaker sales and price pressures. Although that pace of decline picked up slightly from June, it was the second weakest in nearly three years.
The report added that nearly 9 percent of firms surveyed reported a decline in sales, while 7 percent reported expansion.
On a positive note, new export orders rose for the third consecutive month in July, driven by better demand for Egyptian non-oil goods from foreign markets.
Job creation at Egypt's non-oil firms also rose slightly in July, reversing a partial decline in June as companies hoped the drop in sales would be short 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, driven by a rise in new orders.
Kuwait's PMI stood at 51.5 in July, essentially 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 during July to secure new business and expand production,” said Andrew Harker, chief economist at S&P Global Market Intelligence.
He added: “Rebates were often offered despite rising input prices, including record increases in staff costs.”
According to the report, new orders continued to grow at a solid pace in July, although the growth rate slowed to a 10-month low.
S&P Global added that new orders from regular customers helped Kuwait's non-oil companies expand trading activity again in July.
Harker said non-oil firms are struggling to find the right talent to meet growing demand.
“Finding suitably qualified staff was a key challenge for firms in July and these difficulties meant that employment was flat during the month, leading to a further build-up of excellent business,” said Harker. “Firms will be hoping to increase employment more easily in the coming months to expand production and maintain workloads.”
A survey said non-oil firms in Kuwait remained confident output would rise next year, even as sentiment fell to its lowest level since February.
