Promising underlying demand was supported by promotional efforts as companies ramped up production, stepped up purchases of inputs and hired additional workers as windfall deals piled up.
The Arab world’s second-largest economy, which grew 3.8% in 2021, is expected to grow 5.4% and 4.2% in 2022 and 2023, respectively. — Stock photo
Commercial activities in the United Arab Emirates resumed at the start of the third quarter, seeing a faster recovery of new inflows to drive production growth, according to July PMI data.
Promising underlying demand was supported by promotional efforts as companies ramped up production, increased input purchases and hired additional workers as windfall business piled up, according to the S&P Global UAE Purchasing Managers’ report. Index.
“The increase in sales was marked and faster than in June. International demand for the UAE’s non-oil production increased further at the start of the third quarter,” he said.
Showing 55.4 in July, the seasonally adjusted S&P PM, which is a composite indicator designed to give an accurate snapshot of the operating conditions of the private sector economy, pointed to a marked improvement in the health of the sector.
The overall figure fell from 54.8 in June and was above its long-term average.
The bullish PMI report is in line with optimistic projections made by the UAE Central Bank and other institutions. In 2022, according to the regulator, the United Arab Emirates is expected to post its strongest annual expansion since 2011 after rising 8.2% in the first three months of this year on the back of higher oil prices and measures to mitigate the impact of Covid-19. pandemic.
The Arab world’s second-largest economy, which grew 3.8% in 2021, is expected to grow 5.4% and 4.2% in 2022 and 2023, respectively, according to the latest projections from the UAE Central Bank.
While the International Monetary Fund predicts 4.2% growth this year, Emirates NBD forecasts 5.7% growth and Abu Dhabi Commercial Bank predicts 6.0% expansion, supported by a strong rise in the oil sector.
David Owen, economist at S&P Global Market Intelligence, said that at the start of the third quarter, companies signaled a faster recovery in new inflows and increased production accordingly. “As demand strengthened, operational capabilities came under pressure, but companies responded to this pressure by continuing their hiring efforts.”
PMI survey panelists said favorable demand conditions, competitive pricing, marketing efforts and an expanded customer base all led to increased new business inflows in July.
In July, there was another substantial increase in overall input costs, although the rate of inflation eased from June’s 11-year high. Material prices continued to rise much more sharply than labor costs, while fierce competition for new work supported a further decline in selling prices, according to the report.
The rate of expansion was solid and broadly similar to that seen in the previous month. Due to continued growth in new business volumes, companies ramped up production in July.
“The rate of expansion was strong and the fastest in 2022 so far, matching that recorded in May. growing at the fastest pace since March 2020 In response to rising backlogs, businesses continued their hiring efforts Employment rose only marginally Fastest growth in business activity since the start of the year Sales growth accelerates as companies refrain from lifting charges Input cost inflation is moderating from June’s 11-year high,” the report said.
The current round of production expansion is now approaching its second year, a remarkable performance given the continued global headwinds, according to the report.
“The biggest challenge facing non-oil businesses in the UAE is inflation. While the latest results indicated a slower recovery in overall input costs, the rate of increase was nonetheless the second highest in four and a half years amid global shortages of inputs and higher prices for fuel, materials and transportation,” Owen said.
“Once again, companies chose to absorb the additional cost burdens and lower their prices in light of the intense competition for new work. The discount rate, however, eased and was only fractional , indicating that some companies may be ready to increase their fees in the coming months,” Owen said.