Mustafa Abdel Azim (Dubai)
The non-oil private sector in the UAE continued its strong expansion during the month of March, benefiting from the continued strong rise in demand and the increase in commercial activity, which enabled it to absorb part of the inflationary pressures associated with the rise in global commodity prices, according to the data of the Purchasing Index study.
S&P Global’s UAE headline PMI – a seasonally adjusted composite index prepared to provide an accurate overview of operating conditions in the non-oil private sector economy – scored 54.8 for the second consecutive month in March 2022, well above neutral. at 50 points, indicating a sharp improvement in operating conditions.
The study data indicated that the strong rise in demand led to a significant increase in commercial activity during the month of March, as nearly a quarter of the companies participating in the study indicated production growth, and while the growth rate of new business in non-oil UAE companies has not changed since February, It remained close to the post-pandemic high recorded in November 2021, and in cases where new orders were up, committee members often linked this to a further increase in customer demand as markets recovered from the COVID-19 lockdown measures.
The study indicated that while domestic sales were the main driver of growth, there was also a slight expansion in new export business.
At the same time, cost pressures accelerated to a 40-month high, as companies saw particularly strong price hikes in fuel and raw materials due to supply concerns related to the crisis in Ukraine, and input cost inflation was faster than the chain average and robust.
According to the study, efforts to pass the high costs on to customers in some companies have led to the average rate of decline in production prices being the lowest in the current eight-month downturn.
The sharp rise in input prices slowed the growth of input purchases in March, as companies sought to reduce cost burdens and drew on existing stocks to meet customer demand. While the recent surge in purchases was strong, it was much weaker than what we saw in February.
Employment levels rebound
At the same time, employment levels in non-oil companies rebounded, rising for the tenth month in a row, however, despite accelerating to a three-month high, and with a slight increase in employee capacity despite strong demand pressures, companies witnessed a strong increase Others in the backlog, moreover, the backlog rate was the fastest since last October.
Some companies indicated that previous shipping delays contributed to the increase in incomplete orders, although current data indicates an improvement in supplier delivery times that was the fastest repeat rate since July 2020.
According to the results of the study, UAE companies remained confident of an increase in activity over the next year in March, with many citing recent improvements in sales and general economic conditions. However, concerns about inflation, shipping and the war in Ukraine partially affected the level of public confidence.
David Owen, an economist at S&P Global, said the strong rise in demand in the non-oil economy in March overshadowed the worrying challenge posed by global commodity prices. Delivery times have shrunk at the fastest rate in 20 months.