The UAE’s non-oil private sector saw a slight improvement in June despite a slowdown in demand on the back of regional tensions, with the S&PGlobal PMI (pdf) edging up to 53.5 from 53.3 in May. The uptick was driven by stronger output and a stabilization in inventories, though new order growth slowed to its weakest pace in 45 months, while export growth was softer than domestic demand, according to a note (pdf) from Emirates NBD.

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

Firms cited client hesitation amid ongoing instability following the conflict between Iran and Israel, though some were able to cushion the impact through promotions and by expanding customer bases. “The UAE non-oil sector showed signs of a minor setback in June due to the conflict between Israel and Iran,” S&P Global’s David Owen said, adding that the impact, however, was “negligible” considering the expansion in output.

On the bright side, backlogs increased at the slowest pace in 17 months, as companies worked to clear long-standing capacity pressures. Purchasing activity also recovered modestly, while softer inflation in input prices — easing to an almost two year low — allowed firms to lower selling prices marginally for the first time in six months, in a bid to remain competitive.

June also saw a slight uptick in employment, though growth slowed in comparison to the rest of the quarter. Firms continued to recruit for workload management, though some flagged difficulty sourcing skilled labor.

Business confidence has not been impacted by the escalation in regional tensions, though, with confidence at its highest in seven months, attributed to projected sales growth and hopes of regional stability. “[A] rebound in sales growth is wholly possible in the coming months should regional tensions ease,” Owen said.

MEANWHILE IN DUBAI-

Conditions in Dubai weakened further in June, with the emirate’s PMI falling to a four year low on the back of a slowdown in new orders after 45 months of growth. Output also slowed with firms citing weaker demand in tourism following regional tensions, as well as heightened competition. June also saw the emirate record an uptick in overall business activity.

Employment and pricing trends remained muted, with employment growth continuing for the third straight month but at only a marginal pace. Output prices continued to rise, albeit marginally as input inflation eased to an 18-month low.

The story got ink from Reuters and Bloomberg.

ELSEWHERE IN THE REGION-

Saudi Arabia’s non-oil sector seemed to shrug off concerns over regional tensions and low oil prices, with the PMI ticking up (pdf) to 57.2 in June, up from 55.8 in May.

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