Stock - Abu Dhabi / UAE economy
The various summer retail promotions and heavy demand for travel ensured key sectors of the UAE economy had a busy July. Image Credit: Bloomberg

Dubai: Major summer promotions and new orders ensured that UAE business activity recorded a strong showing through July. This was enough for the private sector to ramp up output and, just as important, increased their hiring.

Even on the inflation front, July brought in better tidings, as the rate of cost increases ‘softened’, according to the latest PMI data from S&P Global. “The current run of output expansion is now approaching its second year, a remarkable performance when considering lingering global headwinds," said David Owen, Economist at S&P Global Market Intelligence.

"Once again, (UAE) firms opted to absorb additional cost burdens and cut their prices in line with intense competition for new work. The rate of discounting eased and was only fractional, however, indicating that somefirms may be prepared to hike their charges in coming months."

UAE firms’ rate of expansion last month was the joint-fastest in 2022 and matching that registered in May.

PMI score

For July, the UAE had a PMI (Purchasing Managers Index) score of 55.4 and a good gain on June’s 54.8 as well as being well above the ‘long-run average’. (The PMI data reveal how a country’s businesses are faring when it comes to winning orders, spending on equipment and employment, and how inflation is impacting on them.)

"Businesses remained upbeat towards the year-ahead outlook for output amid expectations of a pick-up in demand, quotations pending approval and planned advertising," said the S&P Global report. But businesses were not willing to get carried away, as the overall level of sentiment fell to a 10-month low during July.

Raw material prices continued to rise much more than wage costs, while ‘fierce competition for new work underpinned another fall in selling prices’. "The biggest challenge facing UAE non-oil businesses is inflation," said Owen. "While the latest results pointed to a softer upturn in overall input costs, the rate of increase was nevertheless the second-strongest in four-and-a-half years amid global shortages of inputs and greater prices for fuel, materials and shipping."