UAE businesses were also hiring more in August, as the dip in their expenses helped free up cash for workforce additions. Image Credit: Supplied

Dubai: UAE private sector activity recorded a further rise in business activity, with the drop in fuel prices also providing a timely boost. Businesses picked up new orders helped by their ability to offer lower selling charges, according to the latest PMI data from S&P Global.

This is also showing up in higher employment numbers, as businesses use freed up costs to bolster workforces. This is the first time since January 2021 that UAE businesses are recording a fairly sharp decline in their costs.

The renewed decrease (in fuel prices) marked a considerable turnaround in inflationary pressures, which had reached an 11-year high in June,” said David Owen, Economist at S&P Global. “The data offers hope for other countries struggling with persistent inflation, although concerns remain that global energy supply constraints will continue to push prices higher.”

Businesses remain cautious

Even with the August upturn, for the medium-term, UAE businesses are sticking to a cautious mood. Confidence about what’s in store for 2023 dropped to a 17-month low during the month, as businesses weighed up further global rate hikes and other cost additions coming their way. More so, as worries filter though as to whether the global economy could enter a full-scale recession closer to this year-end.

August PMI reading

The Purchasing Managers’ Index score – which tracks how businesses are managing on orders and costs – for August came in at 56.7, and up from July’s 55.4. This is the highest since June 2019. "Sales growth picked up even further, supported by additional efforts to provide discounts to clients," said Owen.

Driven by domestic demand

Sales growth in August was the second-fastest in more than three years, which was attributed to the improved client demand and increased price-based promotions. "However, whilst domestic sales remained strong, new export business rose only marginally and at the weakest rate since the beginning of the year," the report finds.

UAE firms stock up

As purchase costs dipped, UAE firms were quick to seize benefits. They ‘sharply’ expanded buying of their key supplies ‘midway through the third quarter’, S&P reports. “The upturn was the most marked for exactly three years. As a result, stock levels grew to the greatest extent since August 2020.”

What worked for UAE businesses in August

UAE firms were aided by a reduction in input costs, which was the first decrease since January 2021.

Lower fuel prices were cited as the main factor helping with the drop in purchasing costs, while wages rose at
a ‘marginal pace’.

The rate at which overall business expenses declined was in fact a joint-survey record, according to S&P Global.