UAE sustains uptick trend as new businesses surge in July
Starting of new projects and an increase in marketing partly drove the rise in activity: Survey
The UAE sustained its resilient trend in July as business conditions improved while growth remained mild, according to the latest market research.
As rising new business drove a solid upturn in activity, the non-oil private sector registered a further marginal recovery in overall conditions during July amid a greater easing of lockdown restrictions. However, firms continued to lower employment in an effort to reduce payroll costs, while output charges fell at a sharper pace, according to IHS Markit UAE Purchasing Manager's Index report.
The PMI, a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy, rose from 50.4 in June to 50.8 in July, to signal a second successive monthly improvement in business conditions.
David Owen, economist at IHS Markit, said the business activity continued to expand at a solid pace in July, as firms enjoyed another upturn in new work. "The further reopening of the economy, including the lifting of curfew measures, helped to reinvigorate consumer spending.
It was also particularly evident that future output sentiment depended on how demand recovered in the coming months, as firms hope that the economy will make strides back to pre-COVID-19 output levels over the second half of 2020."
Owen said employment fell for the seventh month in a row, however, amid weak capacity pressures and efforts by companies to lower workforce costs. This acted as a drag on overall business conditions, as the headline PMI reading of 50.8 indicated just a marginal improvement. "Notably, the rate at which selling charges fell gathered pace and was solid in July, mainly due to growing competition as more businesses returned to more normal operations."
The report noted that a further easing of lockdown restrictions helped to improve customer demand and drive an upturn in new business at the start of the third quarter. Following June's expansion, the latest increase was unchanged and solid overall. "However, firms saw some weakness in sales to foreign customers with new export orders falling modestly, erasing the gains made in June. Nevertheless, the rise in total demand encouraged UAE firms to expand output again in July. The rate of growth was the fastest seen in ten months, albeit still signalling a relatively mild improvement since lockdown."
According to survey respondents, the starting of new projects and an increase in marketing partly drove the rise in activity. Output and new business rise for second month running job numbers fall further as firms seek to lower payroll costs.
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