UAE non-oil private sector grows strongly despite inflationary pressure


Dubai (Reuters) – Growth in the United Arab Emirates’ non-oil private sector strengthened in May to a five-month high as demand remained strong despite inflationary pressures, a survey showed on Friday.

The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) rose to 55.6 in May from 54.6 in April, rising further above the series average since 2009 of 54.1.

The output sub-index also reached its highest since December, rising to 62.5 in May from 61.5 in April, above the series average of 57.5.

David Owen, economist at survey compiler S&P Global Market Intelligence, said the readings indicated the economy “continues to recover strongly from the pandemic.

“Despite the end of the Expo 2020, firms continued to cite rising order book volumes and increased tourism, although this was partly helped by a renewed decline in average prices charged,” he said, referring to the world fair hosted by Dubai for six months through the end of March.

Like much of the world, inflation was the main headwind for the UAE’s non-oil sector.

“Input costs rose at the quickest rate since November 2018, as companies widely noted higher fuel prices as well as increased costs for a wide range of materials such as aluminium, steel, wood and chemicals,” Owen said.

“For now, PMI data suggest that companies are choosing to absorb extra costs rather than pass them onto customers, but this is unlikely to continue indefinitely.”

The employment sub-index rose back into growth territory at 50.7 in May from 49.9 in April, which was the first time it slipped below the 50-mark that separates expansion from contraction since May 2021, albeit marginally.

While still marginal, it was the fastest rate of job creation since October. Firms said increased new orders and delays in replacing departing staff led to hiring.

Expectations from future output improved in May from the prior month, with about 15% of survey respondents providing positive forecasts. While similar to recent months, the sub-index was subdued by historical standards, the PMI report said.

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