The UAE’s non-oil private sector continued to lose momentum in August, as total sales intakes expanded at the slowest rate in more than four years. However, output growth picked up during the month, pushing the S&P Global PMI (pdf) to increase to 53.3 in from July’s 49-month low of 52.9.

“The slowdown added to concerns of fading growth momentum and meant that output was increasingly reliant on backlogs of work,” S&P Global Senior Economist David Owen wrote in the report.

Output growth strengthened to a six-month high: The country’s PMI reading gained partial support from a sharper rise in output levels, which marked the fastest increase in activity for six months and was slightly higher than the survey’s long-run trend. Firms pointed to greater sales, ongoing project work, and growth in local markets as key drivers of the increase in activity.

..but new orders saw a significant slowdown: The seasonally adjusted New Orders Index fell to its lowest level since June 2021, marking a softer rise in firms’ sales. Companies cited competitive pressures and supply chain challenges, including customs delays, as key obstacles to completing sales. Tariffs were also noted as a factor contributing to the slowdown to new export orders, according to a research note (pdf) from Emirates NBD.

Firms cut back purchasing for the first time in over four years: In response to softer demand, businesses scaled back their input purchases in August for the first time in more than four years. This pullback led to another contraction in stocks of purchases, as businesses’ input requirements and appetite for inventory building were “sapped” by slower sales growth.

Input cost inflation accelerated for a second straight month, hitting its highest level since February. This rise was largely attributed to wage increases, with many firms boosting salaries to address cost-of-living pressures and performance incentives. This came alongside a slight increase in employment.

In turn, firms hiked their selling prices at the sharpest rate: While modest overall, the increase was the steepest in five months and ranked among the highest in the survey’s history. “While purchase price inflation came down in August, this was counteracted by an upsurge in wage inflation as recruitment activity remained healthy and cost-of-living rises drove salary demands higher,” Owen noted.

On a positive note, business confidence has hit its highest since October. Output expectations strengthened in August, with business confidence jumping to its highest level since last October. Many firms pointed to stable domestic economic conditions and solid client relationships as key factors to support growth in the upcoming year.

Expect more moderation to non-oil sector activity ahead: Looking ahead, non-oil sector activity across much of the Gulf is forecast to moderate, Capital Economics’ James Swanston noted in a recent research note seen by EnterpriseAM. “Low oil prices will more than offset rising output volumes and, in turn, export receipts will be weaker this year than last,” Swanston wrote, adding that “current account and budget balances will deteriorate, prompting officials to make fiscal policy less supportive.”

OVER IN DUBAI-

Another good month is here for Dubai: Dubai’s non-oil private sector recorded another firm improvement in August, with its headline PMI slightly increasing to 53.6 during the month, up from 53.5 in July, indicating a strong upturn in the non-oil private sector sector.

Stronger client demand + higher project activity were the key drivers: Firms increased their output at the fastest pace in seven months, largely driven by stronger client demand and higher project activity. Total new orders also posted an increase, though the rate of growth was not as much as recorded in July.

Input costs inched up for the second month in a row, though the increase was milder than those observed across the country. In the meantime, selling charges were also increased, stretching the ongoing rise to nine months. Supply chain disruptions in August caused delivery times to increase for the first time since March 2024. This, along with lower demand for new inputs, resulted in the fastest contraction in inventories in over a year.

Sectors seeing the best performance include the travel and tourism sector, as business activity recovered following regional tensions, and wholesale and retail trade, which was the strongest segment despite its PMI contracting m-o-m to 54.5, Emirates NBD noted. The construction index, meanwhile, saw weaker orders and higher input costs.

ELSEWHERE IN THE REGION-

  • In Saudi Arabia, Non-oil business activity saw a robust improvement, boosted by new orders, with the seasonally adjusted figure coming in at 56.4 (pdf) ;
  • Egypt saw a modest contraction in its non-oil private sector (pdf), with the headline PMI coming in at 49.2, marking a slight acceleration in contraction from July’s 49.5;
  • Kuwait’s non-oil private sector saw further improvement in business conditions, albeit at a slower pace, with the headline PMI coming in at 53.0 (pdf).
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