Business costs rise to highest level in 11 years due to soaring fuel prices – News

While new orders continued to rise sharply amid price promotions, input costs rose at the fastest rate in 11 years, leading to slower purchasing and reduced stocking efforts, according to the latest. S&P Global PMI data.



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Published: Tue, Jul 5, 2022, 11:27 PM

Last update: Tue, Jul 5, 2022, 11:30 PM

Inflationary pressures were widespread across the UAE’s non-oil economy midway through 2022, with rising fuel prices pushing up business costs to an 11-year high in June .

While new orders continued to rise sharply amid price promotions, input costs rose at the fastest rate in 11 years, leading to slower purchasing and reduced stocking efforts, according to the latest. S&P Global PMI data.

While a sharp rise in fuel prices led to a sharp increase in business spending and efforts to secure staff through higher wages, businesses continued to see a surge in new orders in June, driving a strong expansion of the activity. It was partly helped by sustained efforts to lower production costs and offset competitive pressures.

“Optimism that demand would remain strong despite inflationary pressures also boosted confidence for the year ahead, as output projections improved to the highest since October last year,” the report said. S&P Global UAE Purchasing Managers’ Index.

The PMI, a composite indicator designed to provide an accurate snapshot of the operating conditions of the non-oil private sector economy, settled firmly above the crucial 50.0 mark in June, but fell from 55. .6 in May to 54.8.

“Non-oil sector performance has improved in each of the past 19 months, helped by a recovery in economic conditions following the lifting of Covid-19 related restrictions. The recovery continued to support strong volume growth new orders in June, with 21% of survey respondents reporting growth from the previous month,” he said.

David Owen, economist at S&P Global Market Intelligence, said businesses came under increased pressure from rising input costs in June, with soaring fuel prices leading to the fastest rate of cost inflation in exactly 11 years. “More than twice as many businesses surveyed reported increased spending compared to May, leading many to reduce spending on inputs.”

“Nevertheless, the latest data suggests companies were unwilling to pass on higher costs to customers in June as exit fees were reduced at the fastest rate in over a year and a half. panelists, the threat of strong competition caused them to offer price discounts to protect their sales,” Owen said.

He noted that while companies remained optimistic about future activity, survey data suggested they were unlikely to maintain cost margins at current levels. “The ratio of input price to output price indices was the highest on record, signaling that price increases for customers are likely in the coming months.”

Businesses have been helped by a strong upturn in new work from overseas. After hitting a six-month high in May, the pace of sales growth nonetheless slowed to its weakest level since January, as some panelists noted that stiff competition had weighed on customer orders. In addition, some companies mentioned that rising interest rates in response to global inflationary pressures had affected household and business spending, according to the report.

However, there is some evidence that companies have had to offer higher salaries to hire and retain staff, as average salaries have risen at the fastest rate in more than four years. Inflationary pressures also hit buying activity in June, which rose only slightly and at the weakest pace in a year, the report noted. [email protected]

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