UAE businesses see lowest growth in new orders - hiring drops too: July PMI

Dubai: UAE non-oil businesses saw new orders drop in July while adding far fewer jobs over cost concerns. This meant the 'weakest growth' in non-oil business conditions since June 2021, according to the latest PMI data from S&P Global.

The major factor was the crisis set off by the Israel-Iran crisis in mid-June and which impacted on business sentiments into July as well despite a ceasefire.

Additionally, at the local level, there was the 'quicker rate of cost inflation' that businesses faced and which led to a 'fresh rise in average prices charged'.

"New order volumes helped (UAE firms to expand, but this trend is declining, with the latest data indicating the softest rise in incoming new work in almost four years," said David Owen, Senior Economist at S&P Global Market Intelligence.

"While survey members partly link this slowdown to tensions between Iran and Israel, which has made some clients hesitant to spend, there were also many comments suggesting that markets are becoming more crowded, making it increasingly difficult to secure new orders."

On the jobs side, S&P Global's July survey indicated a softening in job creation at UAE non-oil companies. Th employment rise showed the 'weakest uplift in four months' and 'coinciding with a steeper rise in outstanding business'.

"Indeed, backlog accumulation was marked, quickening for the first time since January, as companies faced ongoing challenges in completing work on time," the report adds.

UAE July PMI

For July, the UAE Purchasing Managers' Index dropped from June's 53.5 to 52.9 in July, which makes this the lowest level in just over four years. (The PMI score is based on patterns such as business spending plans, hiring, new order wins, costs, etc. Any score over 50 points to businesses still in expansion.)

“Should regional tensions ease, we may see a recovery in sales growth in the coming months," said Owen. "This would also be supported by the subdued price environment, with input costs rising only modestly despite the pace of increase reaching a three-month high."

US tariffs

By and large, GCC economies and businesses remain 'relatively well-insulated' from the new US tariff rollout.

"This is because the GCC region faces a significantly lower tariff rate of 10%,' said Arun John, Chief Market Analyst at Century Financial.

"Moreover, the revenue exposure of GCC companies to the U.S. remains limited. Plus, the US sustained a trade surplus with the UAE last year, recording exports to the UAE totaling $27 billion compared to $7.5 billion in imports from the UAE."

But John says there could be 'some indirect impact' from the 25% tariff by the US on global aluminum and steel imports. "This is significant given that the UAE is the third-largest aluminum exporter to the US," he added.