UAE businesses continued to record sizeable growth in new orders through May. But cost pressures rising too, according to the latest PMI data. Image Credit: Shutterstock

Dubai: Businesses in the UAE are taking on new hires, especially in the manufacturing and construction sectors, as they seek to clear backlogs that built up after the April 16 rains and subsequent disruptions. New staff intake also made sense for these companies as demand for their products and services remained high. 

The UAE's non-oil companies faced a 'record uplift' in outstanding business levels during May, putting 'immense pressure on business capacity," says the latest S&P Global PMI (Purchasing Managers Index) data.

The rate of business activity growth softened to a 16-month low, with some (UAE) companies noting that operations still faced disruptions

- S&P Global's PMI findings for May

"However, the overall performance of private sector firms remained strong, with output and new orders rising sharply," the report adds. Even then, the output within the UAE private sector slowed to a 16-month low during May.

"The findings suggest that firms have a lot of work to do to get on top of their workloads, including rebuilding output levels, hiring workers and boosting inventories," said avid Owen, Senior Economist at S&P Global Market Intelligence. 

"May data signals that hiring and purchasing efforts did pick up, though with the added effect of contributing to higher inflationary pressures."

May PMI score for UAE private sector
The Purchasing Managers Index score for May was unchanged from April's 8-month low of 55.3. This is still
above its long-run average of 54.4 and 'indicative of a robust improvement in operating conditions'. (The PMI score is a composite of data from orders won by businesses, their output, hiring, etc.)

Construction sector is fast-tracking hiring

Since early May, the UAE construction sector has been quite busy adding to their workforce, with some companies doing so at higher than market average incentives, sources say. They are doing so because many of their projects are facing delays, and they want to get back on track at the earliest. The one way to do that is through higher worker intake, and also keeping in mind the shorter work hours during summer.

Based on construction industry feedback, new tenders continue to come through thick and fast, further adding to the pressure on their resources. This year too, the sector is not likely to see a 'summer lull' on new project activity.

Pressure on costs

For businesses, recent weeks are seeing a steady spike in cost of operations. According to S&P Global, greater input demand and the need to replenish stocks led to an intensification of price pressures."

In fact, the input costs have risen at the 'sharpest rate in nearly two years', prompting the fastest uptick in prices charged since April of 2021.

"The focus for the next few months looks to be the recovery of the sector from this crisis," said Owen. "With demand still strong, firms should be in a good position to resume their robust growth once capacity has been restored."