UAE firms hike prices at record pace as costs surge, PMI shows

Dubai: The UAE’s non-oil private sector kept growing strongly in October, but firms raised selling prices at the fastest pace on record as costs surged. The S&P Global UAE Purchasing Managers’ Index (PMI), released on November 4, shows the strain on margins even as demand held up. 

The headline reading eased from September but stayed well above the 50 mark. David Owen, principal economist at S&P Global Market Intelligence called the move unprecedented but also pointed to solid improvement in overall business performance.

“The unprecedented rise reflected efforts to pass cost burdens on to customers, with firms feeling the impact of higher fuel prices and increased charges for critical materials. The findings point to greater inflationary risks for the UAE economy in Q4, especially in the light of successive increases in petrol and diesel prices,” he said.

Dubai PMI at 8-month high

The Dubai PMI ticked up to an eight-month high in October. At 54.6, up from 54.5 in September, the PMI reading signalled a strong improvement in business conditions at Dubai non-oil companies. New business volumes grew at the joint-fastest pace since February. Firms there raised output but made modest cuts to staffing.

Dubai companies also recorded a record rise in selling prices. Overall cost pressures quickened to their fastest since June 2022. Stockpiling was less pronounced than in September.

Price and demand surge

Over the past month, companies paid more for raw materials, fuel, energy, freight, maintenance, storage and rent. Many passed those costs on to customers to protect margins. Output growth eased only marginally from September’s seven-month high. Firms tied the gains to construction, retail, tourism and manufacturing. Some flagged restraints from regional conflict, competition and weaker discretionary spending.

New orders rose faster than in September, helped by new clients and repeat business. Part of the boost came from abroad. New export work increased at the quickest rate in exactly two years.

Suppliers and stocks

Purchasing activity rose at its sharpest pace in nine months. Stocks of inputs grew only marginally, and at the slowest rate since July, because firms used items quickly to fill orders.

Vendor performance improved the most since June. Firms cited good local supply and responsive suppliers. The report indicates that domestic non-oil companies are switching to local vendors to cope with disrupted maritime routes.

Confidence climbs

Expectations for activity over the next year rose to their highest since January. Firms point to strong demand forecasts and hope that regional conditions will improve. Owen notes that better conditions could lift sectors such as tourism