Growth in the UAE non-oil private sector gains momentum in August

ABU DHABI: Growth in the UAE non-oil private sector regained some momentum in August, according to the latest survey data from S&P Global.

After hitting its lowest level for almost three years in July, the upturn in business activity accelerated as firms received a stronger intake of new work, especially from foreign clients.

At the same time, pressure on operating capacity receded as supply chains continued to recover and firms purchased more inputs. That said, input price pressures remained sharp in August, resulting in a mark-up in output charges for the fourth month running.

The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – increased to 54.2 in August, after dropping to a 34-month low of 53.7 in July.

The index signalled a solid improvement in the health of the non-oil private sector, although the rate of expansion was the second-softest in over a year-and-a-half.Non-oil firms benefitted from a stronger upturn in new order intakes half-way through the third quarter.

Strengthening domestic conditions spurred a rise in business and consumer spending, according to reports from survey panellists, while an improvement in international demand led to the sharpest increase in new export orders since October 2023.

Consequently, overall new business growth quickened to a five-month high.

In response, output levels were raised to a stronger degree in the latest survey period. However, although the upturn was sharp, it was among the weakest observed in the past three years. Many respondents noted that ongoing project work had also bolstered activity.

David Owen, Senior Economist at S&P Global Market Intelligence, said: “Although the UAE PMI picked up in August and was consistent with a solid expansion in non-oil business conditions, it remained weaker than the levels recorded earlier in the year, as fewer companies reported uplifts in activity.

“Nevertheless, businesses remain confident that output growth will be sustained over the coming year, especially as sales pipelines remain strong and firms have ample levels of outstanding work to complete. Capacity constraints are also easing which should further aid business activity.

“However, firms should still be wary of their costs, as the survey data indicated another sharp increase in input prices in August, which drove through another uptick in prices charged to customers. Ongoing price mark-ups have the potential to curb demand, adding some uncertainty to the view that growth will continue unabated.”

Businesses faced additional challenges when processing new orders in August, continuing a trend that began in early-2024 and subsequently worsened amid floods and supply-chain issues.

That said, while backlogs of work rose sharply by historical standards, the rate of accumulation was the softest since January.