PMI growth softens in May amid post-flood disruptions

Non-oil business activity softened to a 16-month low in May, as businesses continued to face the knock-on effects of April’s record flooding, according to S&P Global’s UAE Purchasing Managers’ Index (pdf). The index remained flat at 55.3 in May, still well above the 50.0 threshold that separates growth from contraction.

April’s storms weighed on business activity, with businesses reporting continued disruptions and backlogs of work staying on a steep upward trajectory — rising at the fastest pace since the survey began in 2009. Disruptions and attacks in the Red Sea and administrative challenges also weighed on activity, the report notes. Despite this, vendors were able to trim their delivery times more quickly than April.

Price pressures were high…: Purchasing expenses grew to their highest since last November, as firms raced to meet output requirements against the backdrop of robust sales pipelines. Some firms also reported having to restock items that were damaged during the floods, which led to higher input spending, while rising fuel prices and higher wages — which grew at the fastest pace in six years — also intensified price pressures.

…and consumers got the brunt of it: Average prices increased for the first time in seven months as firms passed input costs onto clients, S&P Global said. The uptick was marginal, but was still the fastest in over three years.

Post-flood recovery will take some time: “Firms have a lot of work to do to get on top of their workloads, including rebuilding output levels, hiring workers and boosting inventories,” S&P Global Market Intelligence Senior Economist David Owen said.

Demand perked up in May after companies faced a slowdown in April, with several firms citing improvements in client spending and tourism, according to the report. Some firms reported slowly recovering sales volumes, with new orders rising at the second-weakest pace since August 2023, while other firms reported operations were still on hold.

AND- Staffing levels picked up to a three-month high as businesses took on additional labor in May.

The outlook is still positive: “The focus for the next few months looks to be the recovery of the sector from this crisis. Nonetheless, with demand still strong, firms should be in a good position to resume their robust growth once capacity has been restored,” he added.

Business confidence towards future output also strengthened due to hopes of more stable economic conditions, higher sales, greater earnings, and heightened marketing activity.

DUBAI-

Dubai’s PMI still in decline: Dubai’s business activity slumped to a 15-month low, falling to 54.7, down from 55.1 in April — remaining in expansion territory. The index signaled a “strong improvement in business conditions,” as new orders inched up after recording a 13-month low in April, with some firms reporting higher client activity after the April disruptions.

Inflationary pressures accelerated in May on the back of an increase in raw materials and petrol prices. Overall input costs surged to a 22-month high, leading to the first increase in output prices during the period.

ELSEWHERE IN THE REGION-

• Egypt’s non-oil private sector activity picked up to its highest level in almost three years in May, rising to 49.6 ;
• Saudi Arabia’s business activity growth fell to 56.4 in May, marking its second-lowest PMI reading in 22 months;
• Qatar’s PMI rose to an eight-month high of 53.6 in May up from 52 in April;