How the UAE and Lebanon’s non-oil private sectors fared in May

How the UAE and Lebanon’s non-oil private sectors fared in May: Purchasing manager indices (PMI) tracking non-energy sectors saw the UAE slip to its lowest reading in four years despite remaining firmly in the green, while Lebanon’s non-oil private business activity remained mostly unchanged from the previous month — indicating contraction for the third month in a row.

REMEMBER- The all-important 50.0 mark is the threshold separating contraction from growth. Anything above 50 denotes expansion, while anything below indicates contraction.

UAE-

Non-oil activity sees slowest growth in nearly four years: The UAE’s non-oil activity saw its slowest growth level since September 2021, as “global economic uncertainty linked to US tariffs” negatively weighs on output, according to the S&P Global UAE PMI (pdf) released last week. The headline figure came in at 53.3 in May, down from 54.0 in April.

New orders slowed, while employment grew strongly: The new orders subindex fell to 56.2 in May, down from 56.9 in April, in what is said to be the lowest pace of new order growth in seven months, Reuters writes. Still, the continued growth in new orders was attributed to “favorable demand conditions, good relationships with clients, new marketing strategies, and diverse product ranges.” Meanwhile, employment grew at its strongest rate in a year as new orders created elevated workloads.

Output increased, but at a comparatively slower rate: The output sub-index fell to 57.3 in May from 59.4 in April — the lowest reading since September 2021. The deceleration of output growth was partially attributed to “global economic uncertainty.” However, the output expansion was still “sharp,” supported by demand conditions remaining strong throughout the month.

Input purchases also saw a record decrease during the month, with companies looking to “streamline holdings amid slowing momentum,” according to the S&P report. Growth in backlogs also dropped to a 16-month low during the month, along with a decline in input price inflation — which fell to its lowest since December 2023 “due to the modest increase in raw material prices and staffing costs,” NBK Senior Economist Issa Hijazeen told EnterpriseAM.

Business sentiment has slowed down: “Businesses gave a modest assessment of their activity prospects in May. Optimism eased to its lowest since January, with nearly 10% of companies anticipating an expansion in the year ahead,” the report reads.

LEBANON-

Lebanese non-energy private sector growth remained mostly unchanged in May from the previous month, with businesses seeing modest declines in new orders and output, according to Blominvest Bank’s Lebanon PMI (pdf) released last week. The nation’s headline figure came in at 48.9, down slightly from 49.0 in April, in what is the nation’s third month in the red following its two-month streak in expansion territory at the start of the year.

New orders and output slowed again amid a combination of weak demand and higher shipping costs, according to the report. Exports were a specific drag on overall business activity, with the rate of decline in foreign client demand quickening largely due to “unstable conditions across the Middle East [hindering] sales to non-domestic markets,” panelists said.

Geopolitical issues continue to weigh on the economy: “The U.S. urges faster progress on disarmament — despite Lebanon’s move to disarm Palestinian refugee camps, seen as a potential stepping stone to addressing the all-important Hezbollah’s arsenal. The Gaza war also shows no sign of ending soon. As such, the economy seems to be stuck in limbo, with the momentum witnessed at the beginning of the year dwindling away,” Blominvest Bank’s Mira Said wrote.

Firms’ purchasing activity continued to dwindle in May, with the rate of decline accelerating to a six-month high despite being only marginal overall. Input price pressures also increased slightly during the month, which was attributed to a rise in cost inflation. Output prices were also up as a result, but the rate of inflation in both cases was overall modest.

Businesses’ confidence improved compared to the previous month: “Looking ahead, private sector companies in Lebanon reported a positive year-ahead outlook for activity. This marked an improvement from April, when firms were slightly downbeat, on balance. Anecdotal evidence highlighted positive sentiment surrounding the domestic political environment, in addition to hopes of greater inbound tourism and investment,” the report reads.