The growth of the non-oil private sector economy in the United Arab Emirates has experienced a slowdown in July 2024, marking the lowest level in nearly three years. This downturn is attributed to sustained competitive pressures, increasing price challenges, and capacity overload impacting overall activity, according to the latest report by S&P Global released on Monday.
The S&P Global UAE PMI, a key measure of economic performance, decreased to 53.7 in July, down from 54.6 in June. Despite this drop, the index remains well above the neutral mark of 50.0, indicating that while activity is expanding, it has reached the softest rate of growth since September 2021. David Owen, a senior economist at S&P Global Market Intelligence, noted, 'The drop in the UAE PMI is a further signal that non-oil sector growth is on a downward trend in 2024.
Not only is the index at its lowest for almost three years, but it has also lost momentum in four out of the last five months, falling below its long-term trend level of 54.4.' However, there are upside indicators as well. Businesses reported an increase in new work inflows, ongoing projects, and improving supply chain conditions, which contributed to a sharp rise in sales, although it was the smallest gain since April.
The international market saw a significant boost, with exports rising at the second-fastest rate recorded in the past nine months. As customer demand increased, companies struggled to manage a surge in backlogged work, leading non-oil firms to decrease their inventories for the first time since November 2020.
This situation reflects the ongoing challenges of capacity management, and job creation has eased to a six-month low. Selling prices for products have surged for the third consecutive month, reaching the highest levels in over six years for the second month running. This rise in costs, driven by inflation peaking at a two-year high, has compelled many business owners to transfer some of these increased costs onto consumers.
In a regional overview, the Dubai PMI plummeted to a 2.5-year low of 52.9 in July, down from 54.3 in June 2024. This decline suggests that while there is still growth in new orders, the pace is softened due to the competitive landscape within the emirate. Output growth among Dubai-based businesses has also receded to its lowest level since September 2021.
Looking towards the future, although company morale has dipped to a six-month low, there remains a sense of optimism about potential improvements in economic conditions over the next year. 'Overall, the PMI suggests that the non-oil sector is expanding solidly and could be further empowered if companies manage to address their workload challenges effectively,' Owen commented..