Soft growth in business conditions in November

Businesses in the UAE witnessed a moderation of operating performance during November as growth in new orders slowed to a 14-month low amid concern over a global slowdown weighing on sales and confidence, a survey showed on Wednesday.

The UAE Purchasing Managers' Index (PMI), a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy, shows that amid softer rises in activity, purchasing, and employment, new business rose at the weakest pace since September 2021 and activity growth eased.

According to the latest data, the PMI fell to 54.4 in November from 56.6 in October. “Companies continued to enjoy relatively mild price pressures, but there were signs that concerns of a global slowdown had weighed on sales and confidence,” the S&P Global UAE PMI report said.

Companies reported a modest increase in staff numbers during November, one that was softer than October's recent high. The rise in job levels was one of the fastest seen in the past five years, helping to somewhat alleviate capacity pressures.

Despite the November slowdown, the outlook for the economy at large looked bright. Abdullah bin Touq, Minister of Economy, said on Tuesday that 2022 has been a great year for the UAE economy with trade crossing Dh1 trillion and re-exports crossing Dh300 billion for the first time ever.

“We expect GDP growth of 6.5 per cent this year. I hope it will be more this and the next. To double the economy to Dh3 trillion by 2031, we need to grow seven per cent every year,” he said.

The International Monetary Fund also sounded upbeat about the UAE’s economic growth and forecast an expansion of over six per cent for 2022 last month, a significant increase from 3.8 per cent last year. Central to the projected fast-track expansion in the years to come will be Comprehensive Economic Partnership Agreements (Cepa) that the UAE plans to sign with 26 countries in the next 7-8 years.

David Owen, economist at S&P Global Market Intelligence, said thePMI fell back from its post-pandemic highs to a 10-month low in November, pointing to a slowdown in growth across the non-oil economy.

“New business rose at a particularly weaker pace, amid concerns of strong market competition and a global economic slowdown. Confidence about future output fell to its second lowest for 15 months, leading firms to pull-back hiring growth from its recent high,” said Owen.

He said the headline reading of 54.4 suggests that the UAE businesses are still enjoying robust growth, a feat that is becoming more difficult to achieve in the global economy. “Adding to this, UAE firms are seeing little pressure on input costs, which rose at the softest pace for three months and only marginally,” added Owen.

The general slowdown in growth across the non-oil economy had direct impacts on purchasing and employment in November, said the report. “Input buying rose at the slowest pace since August, with growth softening markedly from October's over three-year high. That said, the upturn was still sharp and contributed to a further increase in inventories,” said the report.

— issacjohn@khaleejtimes.com

• Business