UAE non-oil private sector growth slows as inflation hits – PMI

Panoramic view of Jumeirah Beach Residence (JBR) in Dubai, United Arab Emirates, February 2, 2022. REUTERS/Abdel Hadi Ramahi

DUBAI, July 5 (Reuters) – Business activity in the UAE’s non-oil private sector fell to its slowest pace in five months in June, a survey showed on Tuesday, although growth remained positive for the 19th straight month .

The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) fell to 54.8 in June from 55.6 in May, the lowest level since April, as inflation weighed on the non-oil economy.

The index above 50.0 indicates growth.

Inflationary pressures are rife in the UAE’s non-oil economy, with a surge in fuel prices pushing up costs for businesses in the oil-rich country, according to PMI data.

Purchases slowed and inventories dwindled as input costs rose at their fastest pace in 11 years, the data showed.

S&P Global Market Intelligence economist David Owen said: “Emirati businesses came under increasing pressure in June on rising input costs, as soaring fuel prices drove the fastest rate of cost inflation in exactly 11 years.”

“The ratio between the input price and output price indices is the highest on record, suggesting that prices for customers are likely to rise in the coming months.”

However, despite concerns that inflation will hit spending, the outlook for future activity remains positive.

Output, a measure of business activity, fell to 60.7 in June from 62.5 in May, ending two consecutive months of accelerating growth and hitting its weakest level since February.

The employment sub-index edged up to 51.2 from 50.7 a month earlier, the highest level since August, as companies increased production capacity. Some employers have had to offer higher wages to hire and retain workers as average wages rose to their highest level in four years.

The new orders sub-index continued to expand for the 16th straight month, but was lower than the previous two months, while output prices fell for the second straight month, the biggest drop since November.

Reporting by Alexander Cornwell; Editing by Kathryn Evans

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