UAE's PMI slips to lowest level in four years over geopolitical tensions

Zawya

2 days ago

Geopolitical headwinds continued to weigh on non-oil activity in the UAE, with July's Purchasing Managers' Index (PMI) slipping to its lowest level in four years.
The seasonally adjusted S&P Global UAE dropped more than a point to 52.9 in July, down from the previous month's 53.5, implying the rate of growth was softer than the survey's long-run trend.
The survey signalled the weakest growth in non-oil business conditions since June 2021, as regional tensions continued to weigh on sales. A further slowdown in new business growth made some clients hesitant to commit to new spending, the report said.
Hiring and purchasing growth also suffered, while output expanded sharply as firms sought to prevent further increases in backlogs of work.
Additionally, a quicker rate of cost inflation led to a fresh rise in average prices charged.
Despite higher orders compared to June, survey panellists were weighed down by weaker tourism activity and global trade disruptions.
'New order volumes helped firms to expand, but this trend is declining, with the latest data indicating the softest rise in incoming new work in almost four years,' David Owen, Senior Economist at S&P Global Market Intelligence, said.
'While survey members partly link this slowdown to tensions between Iran and Israel, which has made some clients hesitant to spend, there were also many suggesting that markets are becoming more crowded, making it increasingly difficult to secure new orders,' he added.
The PMI for July indicated overall increase in output remained strong, with some firms reporting output increased in response to new sales opportunities, rising client incomes, and the clearance of pending work.
Employment rose slightly, but marked the weakest uplift in four months, coinciding with a steeper rise in outstanding business.
Stocks of inputs fell for the third time in five months, which was partly linked to backlog clearance efforts and some delays in the receipt of supplied items.
Higher costs for shipping, raw materials, wages and capital, also weighed on firms, with the overall rise in input prices being the fastest since April.
Projections for future activity remained optimistic in July, driven by hopes of strengthening demand levels. However, the degree of confidence eased slightly, as some companies highlighted risks stemming from global economic uncertainty and heightened competition.
'Should regional tensions ease, we may see a recovery in sales growth in the coming months… Nevertheless, the ongoing trends of rising competition, limited inventory, constrained hiring growth and relatively low confidence among surveyed firms suggest that downside risks remain elevated,' Owen added.
Dubai PMI
The Dubai non-oil private sector rose in July, rising to 53.5 from a 45-month low of 51.8 in June, amid a recovery in demand growth.
The survey attributed new orders to the recovery, which indicated a sharper improvement in sales volumes compared to June.
Survey participants reported better business conditions and an increase in new client enquiries.
As a result, Dubai non-oil firms expanded output at the sharpest rate in five months while continuing efforts to increase employment and inventories.
The survey indicated that although input costs rose at the fastest pace since April, overall inflationary pressures remained relatively modest. Consequently, non-oil firms raised their selling prices at the slowest rate in eight months.
(Writing by Bindu Rai, editing by Brinda Darasha)