While the UAE's non-oil private sector grew at a slightly slower pace in May, improved operating conditions drove business confidence among firms to their strongest level since October 2021, according to a latest business survey.
The seasonally adjusted S&P Global UAE Purchasing Managers' Index (PMI) posted 55.5 in May, dropping from 56.6 in April to a three-month low. The index remained above the 50.0 no-change mark and its long-run average (54.2), the report noted on Monday.
The upturn reflected strengthening demand conditions in the domestic economy, as well as a sharp improvement in supply chains which helped to keep cost pressures subdued, the report said.
David Owen, Senior Economist at S&P Global Market Intelligence, said the latest headline reading signalled a robust improvement in business conditions, driven by marked upturns in activity and new work.
"Moreover, rising new work intakes and strengthening demand conditions gave firms greater confidence for the year ahead. The Future Output Index showed optimism rising to the highest level since October 2021, with firms pinning their hopes on projections that the strong run of demand momentum will continue."
However, the rising new order inflows exerted great pressure on business capacity in May, extending the current sequence of backlog accumulation to almost two years. Notably, employment levels also grew at the second-fastest pace since July 2016.
Purchasing activity at non-oil firms increased sharply, although to a lesser extent than in the previous month.
Meanwhile, expectations for output over the next 12 months rose improved for the fifth consecutive month to the highest level since late-2021 as firms grew more confident about economic prospects.
(Writing by Brinda Darasha; editing by Seban Scaria)