UAE sees steadfast growth as business conditions improve

The latest market research indicates that the UAE maintained its resilient trend in July as business conditions improved though growth stayed mild.

As a result of a significant upturn in activity, the non-oil private sector reported a further modest improvement in overall conditions during July in the midst of a greater easing of restrictions on lockdown.

According to the IHS Markit UAE Purchasing Manager’s Index report, however, companies continued to cut jobs in an attempt to minimize payroll costs while output charges dropped at a sharper rate.

The PMI, which is a composite indicator designed to provide an objective analysis of non-oil private sector operating conditions, rose from 50.4 in June to 50.8 in July, reflecting a second consecutive monthly improvement in market conditions.

It is also particularly clear that future production optimism depends on how demand recovers in the coming months, as businesses hope for the economy to make headway back to pre-COVID-19 output levels in the second half of 2020.

IHS Markit economist David Owen said market activity continued to grow at a steady pace in July as companies witnessed another upturn in new work.

“The economy’s further reopening, including the easing of curfew controls, has helped to revitalize consumer spending. Notably, the rate at which selling charges fell gathered pace and was solid in July, mainly due to growing competition as more businesses returned to more normal operations.

He also added that jobs dropped for the seventh month in a row, in the midst of poor capacity pressures and company measures to reduce employment costs. This served as a brake on overall market conditions, he says.

The report notes that further relaxation of lockdown constraints helped to increase consumer demand and drive an upturn in new business at the beginning of the third quarter.

According to survey respondents, a part of the rise in activity was motivated by the launch of new ventures and a rise in marketing. While for the second consecutive month production and new business rose further but witnessed a drop in job numbers as businesses try to reduce payroll costs.