UAE Businesses Raise Prices At Fastest Rate As Confidence Rises

(MENAFN- Khaleej Times) UAE non-oil businesses raised their selling prices at the fastest pace in the survey's history in October, as companies passed on a sharp rise in operating costs while customer demand strengthened, according to the S&P Global UAE Purchasing Managers' Index (PMI) released on Wednesday.

The headline PMI stood at 54.8 in October, down slightly from 55.3 in September but still signalling a solid improvement in business conditions across the non-oil private sector. Any reading above 50 indicates growth.

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Output prices rose at the sharpest rate since the survey began in August 2009. Panellists frequently linked the increases to spiralling operating costs and efforts to protect margins.

Input price inflation, meanwhile, quickened to its fastest pace since June 2022, driven mainly by higher purchase costs. Firms reported paying more for a wide range of raw materials, as well as fuel, energy, freight, maintenance, storage and rent.

David Owen, Principal Economist at S&P Global Market Intelligence, said the findings point to greater inflationary risks for the UAE economy in the fourth quarter.

“The unprecedented rise reflected efforts to pass cost burdens on to customers, with firms feeling the impact of higher fuel prices and increased charges for critical materials,” he said, adding that the risks were heightened by successive increases in petrol and diesel prices.

Demand and output stay strong

New orders rose at a sharper pace than in September, supported by both new clients and repeat business. Companies said part of the upturn came from foreign demand, with new export work rising at the quickest rate in exactly two years.

Output growth remained strong at the start of the fourth quarter, easing only marginally from September's seven-month high. Firms linked higher activity to construction, retail, tourism and manufacturing, although some cited restraints from regional conflict, competition and lower discretionary spending.

Employment fell fractionally in October, the third decline in the past five months. Some firms cut headcounts to control costs, offsetting hiring at others in response to rising sales.

Backlogs of work increased sharply again as new orders outpaced firms' ability to complete existing projects, though the pace of accumulation was the softest in three months.

“There was also evidence that firms were reluctant to take on staff while costs are high. This all suggests that businesses are focused on protecting their margins whilst sales recover,” Owen said.

Confidence at highest since January

Business optimism strengthened, with expectations for activity over the coming year rising to their highest since January. Firms attributed the positive sentiment mainly to robust demand forecasts and hopes that regional conditions will improve, particularly for sectors such as tourism.

Purchasing activity rose at its sharpest pace in nine months as companies responded to stronger demand. Stocks of inputs increased only marginally, at the slowest rate since July, as purchased items were often used quickly to fulfil sales.

Supply conditions were supportive. Vendor performance improved to the greatest extent since June, with firms citing good local supplies and responsive suppliers. The survey said this continued the trend of domestic non-oil firms switching to local vendors to combat the effects of disrupted maritime routes.

“Alongside the sharpest rise in purchasing activity for nine months, this should help businesses keep pace with growing order books heading into the end of the year,” Owen said.

Dubai PMI hits 8-month high

The Dubai PMI edged up to an eight-month high of 54.6 in October from 54.5 in September, signalling a strong improvement in conditions for the emirate's non-oil companies.

New business volumes rose sharply, at a rate matching the fastest since February. Dubai firms raised output but made only modest reductions to staffing.

As across the UAE, Dubai companies reported a record increase in selling prices, mainly choosing to pass higher input costs on to customers. Overall cost pressures quickened to their fastest since June 2022.

Local firms were more confident about future activity, though cost considerations meant stockpiling was less pronounced than in September.

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