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Non-oil business activity grew at its slowest pace in three years in September on the back of rising costs and capacity constraints, according to S&P Global’s UAE Purchasing Managers’ Index (pdf). The country’s headline PMI slipped to 53.8 in September from 54.2 in August, marking its second-lowest reading in three years, yet still remaining above the 50.0 threshold separating growth from contraction.
Weaker growth came on the back of slower gains in new orders and business activity, despite strong demand — especially from international markets. Exports continued to grow but the rate of growth was its second-lowest in 18 months on the back of rising competition and “caution towards the business outlook,” the report said. Job creation also fell to its lowest rate since December 2022.
The non-oil sector is seeing a “loss of momentum […] with growth having slowed considerably since the start of the year,” S&P Senior Economist David Owen said.
Backlogs are continuing to pile up: Backlogs of work rose to a four-month high in September, continuing a trend that started in February and was exacerbated by the April floods. The rising backlogs led to an uptick in purchases, with firms using up their new purchases to meet existing commitments. Customs duties delaying input deliveries were also cited as a major contributor to slower supplier performance.
Price pressures remained high: Input price inflation persisted, driven by higher shipping, fuel, and technology expenses. As a result, businesses raised their selling prices for the fifth consecutive month, and at the fastest rate since early 2018, as they continued to pass increased costs onto customers.
Business sentiment shifted to a more cautious outlook for the coming year, with expectations now “at their lowest since early 2023,” said Owen.
On the bright side, lighter cost pressures in September compared to the last few months “could be a sign that the inflationary trend will lessen,” offering some relief to firms, Owen added.
MEANWHILE, IN DUBAI-
Dubai’s PMI diverged from the UAE’s: Business activity levels in Dubai grew at their fastest level in four months, pushing businesses to increase staffing and inventories despite a slower increase in business volumes.
Input costs rose at their softest pace in five months, but companies still raised their prices at the fastest pace since early 2018.
ELSEWHERE IN THE REGION-
- Saudi Arabia’s business activity growth accelerated to a four-month high of 56.3 (pdf) in September, up from 54.8 in August, as faster growth in output and new orders outpaced capacity shortfalls and a lull in purchasing activity;
- Egypt’s non-oil private sector activity is back in contraction territory, dipping to 48.8 (pdf) in September, after finally reaching growth territory for the first time in years in August.
