Businesses seek competitive pricing as energy, commodity prices drop

As businesses looked to further aid sales growth through competitive pricing, operating conditions improved at a healthy pace once again across the UAE non-oil economy, data from S&P Global shows



Consumer spending in the UAE continued the upswing after recording a 22 per cent in the first half of the year, signalling a sustained economic rebound.
Consumer spending in the UAE continued the upswing after recording a 22 per cent in the first half of the year, signalling a sustained economic rebound.
by

Issac John

Published: Wed 5 Oct 2022, 4:17 PM

Business activity levels across the UAE increased sharply in September amid robust demand growth as a continued drop in the price of energy and other commodities helped to keep cost inflation subdued compared to the first half of the year.

As businesses looked to further aid sales growth through competitive pricing, operating conditions improved at a healthy pace once again across the UAE non-oil economy, data from S&P Global shows.

Although purchasing Managers' Index (PMI) dropped last month, it was the second-highest since June 2019 as strong new business growth continued to drive increases in output and employment. Firms also encountered relatively mild price pressures, while input costs rose only slightly after a renewed fall in August.

The price of petrol and diesel dropped by 38 fils per litre from October 1. The decline for the third month in a row. In September, fuel prices for Super 98 dropped sharply to Dh3.41 per litre from Dh4.03 per litre in August. Special 95 was priced at Dh3.30 per litre, down from Dh3.92 while diesel saw a decrease to Dh3.87 from Dh4.14.

The UAE PMI was slightly lower at 56.1 in September, after August's 38-month high of 56.7, but was nonetheless indicative of another strong pace of improvement in the non-oil economy, said David Owen, an economist at S&P Global Market. Intelligence.

“At a time of heightened global recession risks, these findings suggest that domestic businesses are keeping well clear of economic storms in other regions, helped by above-trend rates of growth in output and new business as the country continues to recover from the pandemic,” Owen said.

He observed that low price pressures are also helping to drive growth, with September data pointing to another month where inflation had rapidly come off the boil since the first half of the year. Despite input costs rising (after dropping in August), they did only slightly, as downward movements for a swathe of commodity prices helped to ease the burden on firms' procurement budgets.

Consumer spending in the UAE continued the upswing after recording a 22 per cent in the first half of the year, signalling a sustained economic rebound. Spending on retail items grew 16 per cent, year on year, in the first six months of 2022 while spending on non-retail goods rose 31 per cent in the same period, data from the State of the UAE Retail Economy report shows.

In Kearney’s FDI Confidence Index, the UAE remains the Middle East’s top hotspot for foreign capital inflows, improving its ranking from 15th last year to 14th this year. The strong global investor confidence in the UAE is reflected in a forecast by Henley & Partners that about 4,000 millionaires are expected to emigrate to the UAE this year. Central to the country’s attractiveness as a business and financial hub are plans to deepen trade ties in fast-growing economies in Asia and Africa with the aim to invite $150 billion in foreign investment,”

The PMI report said the upturn in business conditions was marked by another robust increase in new business volumes at the end of the third quarter of the year. In total, just over a quarter of firms raised their output over the course of September, compared to 4.0 per cent which recorded a decrease.

“However, strong client demand and project backlogs meant that businesses continued to face strains on their capacity, leading to a solid uptick in outstanding orders.”

— issacjohn@khaleejtimes.com


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