The UAE's non-oil private sector faced ongoing headwinds in May, as regional geopolitical tensions and supply-chain disruptions constrained growth and pushed operating costs up further.
The seasonally adjusted S&P Global UAE Purchasing Managers' Index (PMI) – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – rose from 52.1 in April to 52.6 in May, an S&P note said.
The index signalled that operating conditions improved during May, albeit only modestly, with the reading well below its long-run average of 54.3.
Although output growth reached a three-month high in May, the rate of expansion remained limited compared to that normally observed by the survey.
Approximately 21% of firms reported increased activity, which they linked to stronger market demand, project expansion and government-backed initiatives. However, this positive momentum was tempered by the 10% of respondents experiencing downturns, amid widespread comments of geopolitical disruptions and rising operational costs, the report said.
New business growth was similarly subdued in May, holding close to April's 62-month low, as regional tensions continued to drive high levels of business uncertainty. Order books were again impacted by a decline in export sales, although the pace of reduction moderated considerably from April.
The subdued demand environment trigged noticeable adjustments to business operations during May. Backlogs of work accumulated at the slowest pace in nearly three years, as firms found greater capacity to address outstanding orders amid restrained sales growth.
Meanwhile, the rise in employment slowed to its mildest pace since last October, with companies citing subdued demand growth, rising input costs and increased automation as factors constraining hiring. Supply-chain conditions deteriorated in May, with delivery times lengthening for the second time in three months and to the greatest extent since April 2020.
Restrictions in the Strait of Hormuz led to widespread disruptions, with panellists mentioning the direct impact on input deliveries and knock-on effects across downstream sectors.
The supply shock prompted the first decline in purchasing activity for nine months, as companies curtailed normal buying patterns. That said, there were some reports of increased stockpiling to mitigate future disruptions, the report said.
