A business activity survey revealed that the non-oil private sector in the United Arab Emirates expanded at its fastest pace in two years during July, as demand recovered from the COVID-19 pandemic. The IHS Markit Purchasing Managers' Index (PMI) for the UAE, adjusted for seasonal factors and covering the manufacturing and services sectors, rose to 54 from 52.2 in June, marking the highest reading since July 2019. New orders increased significantly, leading to a rise in production to 57.1 in July from 53.6 in June.
Companies continued to hire staff, with the employment sub-index reaching its highest level since January 2019, although the monthly increase was marginal, moving up to 50.7 from 50.6 in June. This increase was linked by respondents in the report to efforts to expand sales divisions within UAE companies, with the fastest hiring rate since January 2019. Additionally, companies increased their purchasing activity in July after a slight decline in June.
IHS Markit economist David Owen stated, "The non-oil private sector in the UAE has made a strong start to the third quarter of the year, witnessing the largest rise in new orders in two years, amidst rising domestic sales and strengthened market confidence. Production has increased in line with this expansion." Input costs for companies rose in July due to delayed shipments from Asia. Owen added, "With the resurgence of COVID-19 cases in Asia, companies also reported worsening supply chain issues. In fact, delivery times have stretched to their longest since the pandemic began in April 2020."
Measures related to the coronavirus in other parts of the world led to a third consecutive decline in export sales in July, although the decline was less pronounced than in June. Companies participating in the survey continued to anticipate future growth, as easing COVID-19 restrictions and the Dubai Expo 2020 contributed to improving economic conditions. However, the survey showed that companies' overall expectations declined month-on-month in July for the first time in eight months. Companies expect continued growth in the future supported by the easing of COVID-19 restrictions and the Dubai Expo 2020.
