Non-oil business activity in the UAE expanded at a slower rate in November than in the previous month, a survey showed on Wednesday, as softer rise in new export business dampened sales growth.
The seasonally adjusted S&P Global UAE Purchasing Managers' Index ticked slightly lower to 57 in November from 57.7 in October, yet well above the 50.0 threshold mark that signals expansion in activity.
Firms reported a sharp rise in new business inflows and this upturn spurred inventory growth levels to rise to a near six-year high, placing some pressure on supply chains and material prices. Overall cost inflation remained stronger than recent trends, but selling prices were largely stable, the report said.
"The strong run of demand growth in the UAE non-oil economy sparked a rapid increase in input buying during November, as firms looked to ensure they were in a good position to take advantage of growth opportunities. Indeed, the uplift in buying – the fastest since July 2019 supported the most rapid build-up of stocks in close to six years, benefitting both local businesses and trade partners," said David Owen, senior economist at S&P Global Market Intelligence.
Although total sales expanded at one of the fastest seen in close to four-and-a-half years, it slowed markedly from October, with some firms noting greater competitive pressures and a softer rise in new export business.
While output levels rose during November, the volume of orders left unfinished rose after October data signalled the first decrease for 28 months.
Input purchasing expanded rapidly in November as firms looked to keep robust stock volumes amid strong demand.
Firms saw a solid rise in purchase prices, which despite softening from October, was the second-quickest since mid-2022.
Looking forward, while firms expected activity levels to remain high, there was a clear drop in confidence levels. This was mainly due to concerns at some companies that competitive pressures could erode market share. With this in mind, staffing growth stayed relatively mild, while salaries also ticked up only slightly, the report said.
"(Despite this)businesses were much less upbeat about the future path of activity, as some survey panellists reiterated concerns that a large number of firms are entering the market. The build-up of competition was likely a key factor behind stock-building efforts, with businesses wary of falling behind in a fast-growing economy," said Owen.
(Writing by Brinda Darasha; editing by Seban Scaria)