How UAE’s non-oil private sector fared in April

The UAE’s non-oil private sector had its weakest month in more than five years in April amid increased cost pressures and ongoing supply chain disruptions due to the regional war, according to S&P Global’s latest Purchasing Managers’ Index (PMI) report (pdf). The country’s seasonally adjusted PMI slipped to 52.1, down from 52.9 in March, marking the softest expansion since February 2021.

REMEMBER- The 50.0 mark is what separates expansion from contraction, so anything below 50.0 signals contraction. The last time the UAE’s non-oil sector was in contraction territory was in 2020, at the peak of Covid-19.

Shipping route disruptions — coupled with a slump in demand in other sectors — led to a decline in output and export orders, according to the report.

The drop was largely expected, and the fact that it didn’t fall by a wider margin is a sign that some recovery measures have helped. “The smaller drop reflects the fact that the UAE’s use of central bank measures, including the extension of credit to indebted businesses and individuals, is helping sustain the momentum,” MENA economist Hamzeh Al Gaood tells EnterpriseAM.

Costs bite: Oil and transport costs rose sharply, leading some businesses to reduce staff and freeze (or cut) salaries, with salary inflation falling to a 33-month low and workforce numbers across the non-oil sector falling to their lowest levels so far this year.

We’ve been expecting this: As we’ve recently noted, surging fuel, shipping, and ins. expenses have been weighing on businesses. While many firms initially attempted to insulate customers by absorbing these overheads, they are now beginning to pass those costs through to the broader economy. The hardest hit sectors, analysts tell us, include transport and logistics.