Confidence in private sector companies in the UAE is highest since the pandemic. Expectations for next year reach their highest level since March 2020

September 5

The UAE PMI indicated another strong improvement in non-oil private sector business conditions in August, driven by a notable rise in production and new business. While there were additional signs that demand momentum had eased from the multi-year high seen in the second quarter of the year, businesses became increasingly confident that activity levels would continue to rise. Optimism reached its best levels since March 2020.

Strong confidence was fueled by a sharp increase in purchases and continued job creation in August, supported by lower cost pressures. Sales price reductions continued, but at a slower pace, as purchase prices rose and customer demand increased.

Business growth

S&P Global’s seasonally adjusted UAE headline Purchasing Managers’ Index (PMI) – a composite index designed to give an accurate overview of operating conditions in the non-oil private sector economy – fell from 56.0 points in July to 55.0. point in August, indicating a strong improvement in business conditions.

While the benchmark index fell to its lowest level since February, it remained well above the neutral level (50.0 points). Growth in business activity in the non-oil economy remained sharp compared to historical data in the middle of the third quarter, despite falling to the lowest level since January.

More than a quarter of the companies participating in the study indicated an increase in production since the previous month, and most of them attributed this increase to an increase in the volume of new business. The increase was also notable in new business, with participating businesses citing strong economic growth supporting rising customer numbers and increased household spending.

Strong domestic sales

Strong domestic sales were also recorded as well as a strong increase in new export business, which was the fastest in just over a year. However, although overall new business growth has been higher since July, it remains below the four-year record seen in June.

However, businesses showed a greater degree of confidence that activity growth will continue over the next 12 months and in fact, confidence levels were the strongest since the onset of the Covid-19 pandemic in March 2020.

Increased inflows of new orders and rising business confidence led to a sharp increase in purchasing activity in August, and the expansion reached its highest level in four months. Efforts to replenish inventory in light of sales growth expectations led to a strong increase in input inventory as well.