UAE’s non-oil economy remains strong in July as PMI stands at 56

The UAE’s non-oil economy witnessed strong growth at the beginning of the second half of 2023, with companies increasing their hiring and buying activities, despite a softer upturn in sales, an economic tracker revealed.

According to the seasonally adjusted S&P Global UAE Purchasing Managers’ Index, the country’s PMI stood at 56 in July compared to 56.9 in June.

This still indicates a positive trend as any readings above 50 are considered a growth in economic activities, while figures below 50 show contraction.

Higher business activities were driven by an upturn in new orders, which continued to be boosted by strong customer demand and improving market conditions, the report stated, citing survey panelists.

However, it noted that growth eased since June as several firms faced greater competition which dampened sales in the process.

“The latest PMI data pointed to a slight recalibration of the strength of the UAE non-oil economy in July, as new business growth slowed from its four-year high in June and the output expansion subsequently lessened,” said David Owen, senior economist at S&P Global Market Intelligence.

He added: “Nevertheless, the headline PMI reading of 56 showed that the sector remained in good health in general, with market conditions continuing to improve and firms reporting strong rates of both customer demand growth and job creation.”

According to the report, the rise in new orders helped firms to expand hiring, leading to a moderate rise in employment.

The report added that companies in the UAE reported improvement in supplier delivery times and an easing of cost pressures in July, as the rate of overall input price inflation softened to a three-month low.

“Firms were confident that activity levels will continue to grow, with optimism at its second-strongest level in just over a year. Boosting confidence was a softening of input cost pressures, which allowed firms to reduce their selling prices and expand stock holdings,” said Owen.

The report went on to say that output expectations of firms for the year ahead were upbeat in July, climbing to the second-highest level in just over a year.

“July findings signaled that the UAE non-oil sector will continue on its expansion path in the second half of this year,” added Owen.

Egypt’s non-oil sector declined slightly in July

Meanwhile, Egypt’s PMI report suggested the country’s non-oil private sector growth witnessed a slight decline in July.

The country’s PMI stood at 49.2 in July — a slightly better figure compared to 49.1 in June. Even though non-oil business activities in Egypt have shrunk for 32 consecutive months, S&P Global said that July’s contraction was the slowest since August 2021.

The report revealed that output decreased at the slowest pace in July since September 2021 as new order inflows dropped modestly, and there was a renewed uptick in backlogs.

“The decline in new orders also showed further signs of softening, as firms reported initial pointers of a recovery in market demand following a lengthy downturn,” said Owen.

He added that July witnessed positive signals for inflationary pressure which will be welcomed by businesses and customers alike, following a record high Consumer Price Index reading of 36.8 percent in June.

“Selling prices rose modestly and at the softest pace since April 2022, which should help to boost demand in the months ahead,” he said.

Even though the growth of Egypt’s non-oil private sector showed signs of stabilization in July, firms are still fairly subdued about the future, with just 6 percent of survey panelists expecting output to grow over the next 12 months.