The UAE’s non-oil private sector growth remained steady in May, with the country’s Purchasing Managers’ Index (PMI) holding firm at 55.4, unchanged from the previous month, according to an economy tracker.
A report by S&P Global found that non-oil companies in the UAE experienced a record increase in outstanding business levels in May. Robust sales pipelines and the lingering impact of April’s severe flooding event significantly strained business capacity.
David Owen, S&P Global’s senior economist, stated that “UAE non-oil companies continued to face relentless pressure on business capacity in May, as the latest PMI survey data signaled the largest-ever increase in backlogs of work.” He added that while this can be partly attributed to the country’s record rainfall and flooding in April, capacity pressures were already at historic levels in March due to robust sales and supply chain challenges from the Red Sea crisis.
Steady PMI readings and growth indicators
The UAE’s PMI stood at 56.9 in March, following 57.1 in February and 56.6 in January. Any PMI reading above 50 indicates growth in the non-oil sector, while readings below 50 signal contraction. The May PMI of 55.4 was unchanged from April’s eight-month low, though still above the long-run average of 54.4, suggesting a robust improvement in operating conditions.
Intensified price pressures
The survey also highlighted increased input demand and the need to replenish stocks, leading to intensified price pressures in May. Input costs rose at the sharpest rate in nearly two years, prompting the fastest increase in output prices since April 2021. Additionally, the rate of business activity growth softened to a 16-month low, with some companies noting operational disruptions.
Firms face challenges in recovery
According to Owen, “The findings suggest that firms have a lot of work to do to get on top of their workloads, including rebuilding output levels, hiring workers and boosting inventories.” He noted that while hiring and purchasing efforts did pick up, this also contributed to higher inflationary pressures.
Outlook for robust growth
Looking ahead, Owen highlighted that the focus for the next few months will be on the sector’s recovery from the crisis. However, with demand still strong, he believes firms should be in a good position to resume their robust growth once capacity has been restored.
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