UAE Non-Oil Sector Growth Hampered by Flood Disruptions - PMI Report

UAE, 6 June, 2024 : According to a recent survey released on Wednesday, the growth rate of business activity in the UAE's non-oil sector dipped to a 16-month low in May. This decline was attributed to disruptions caused by April's record flooding event, resulting in a significant increase in backlogs of work.

The seasonally adjusted S&P Global UAE Purchasing Managers' Index (PMI) remained unchanged at 55.3 in May, the same level as April's eight-month low. Despite this, the reading still surpassed the long-run average of 54.4, indicating continued improvement in operating conditions.

David Owen, senior economist at S&P Global Market Intelligence, noted that the surge in backlogs could be partly attributed to April's record rainfall and subsequent flooding. However, he highlighted that capacity pressures were already elevated in March due to robust sales pipelines and supply chain challenges stemming from the Red Sea crisis.

Although demand rebounded in May following April's slowdown, the rise in total new orders was the second-weakest since August 2023.

To address capacity constraints, non-oil companies increased staffing levels in May, with job creation reaching a three-month high. Purchasing growth also strengthened, reaching its highest level since November 2023, driven by robust sales pipelines and output requirements. Some firms reported replenishing items damaged during the floods.

However, overall input costs rose sharply in May, driven by increasing fuel prices and wages, the latter growing at the fastest rate in over six years.

Despite these challenges, surveyed firms expressed improving confidence in the future, citing stabilizing economic conditions, higher sales, increased profits, and promotional activities.

Meanwhile, in Dubai, the PMI dropped to its lowest level in 15 months, reflecting a further slowdown in activity growth. New order growth saw a modest recovery in May, following a 13-month low in April, as some firms reported increased client activity post-flood disruptions.

Inflationary pressures increased in May, with reports of higher prices for raw materials and petrol. Overall input costs rose at the quickest rate since July 2022, resulting in the first increase in output prices during this period.

Looking ahead, Owen emphasized the focus on sectoral recovery from the crisis, with strong demand positioning firms for robust growth once capacity is restored.

Source : www.zawya.com