The UAE’s private sector saw a further increase in commercial activity, with the decline in fuel prices serving as a welcome boost. According to the most recent PMI data from S&P Global, businesses increased their ability to offer lower selling prices, which helped them win new business.
This is also showing up in higher employment numbers, as businesses use freed-up costs to bolster workforces. This is the first time since January 2021 that UAE businesses are recording a fairly sharp decline in their costs.
The renewed decrease (in fuel prices) marked a considerable turnaround in inflationary pressures, which had reached an 11-year high in June,” said David Owen, Economist at S&P Global. “The data offers hope for other countries struggling with persistent inflation, although concerns remain that global energy supply constraints will continue to push prices higher.”
Even with the August upturn, for the medium term, UAE businesses are sticking to a cautious mood. Confidence about what’s in store for 2023 dropped to a 17-month low during the month, as businesses weighed up further global rate hikes and other cost additions coming their way. More so, as worries filter through as to whether the global economy could enter a full-scale recession closer to this year-end.
The Purchasing Managers’ Index score – which tracks how businesses are managing on orders and costs – for August came in at 56.7, and up from July’s 55.4. This is the highest since June 2019. “Sales growth picked up even further, supported by additional efforts to provide discounts to clients,” said Owen.
Sales growth in August was the second-fastest in more than three years, which was attributed to the improved client demand and increased price-based promotions. “However, whilst domestic sales remained strong, new export business rose only marginally and at the weakest rate since the beginning of the year,” the report finds.
UAE businesses acted quickly to benefit when buying costs declined. Midway through the third quarter, they “sharply” increased their purchases of their essential supplies, according to S&P. “The improvement was the most pronounced in precisely three years. As a result, stock levels increased to their highest level since August 2020.
