The UAE non-oil private sector registered a further marginal recovery in business conditions during July due to easing lockdown restrictions, a survey showed on Wednesday. However, firms continued to lower employment in an effort to reduce payroll costs, while output charges fell at a sharper pace.
The seasonally adjusted IHS Markit UAE Purchasing Managers' Index (PMI), which covers manufacturing and services, rose 50.4 in June to 50.8 in July, signalling a second successive monthly improvement in business conditions. The rate of growth remained marginal and represented only a mild recovery from the downturn experienced by UAE businesses as a result of COVID-19 pandemic.
David Owen, economist at survey compiler IHS Markit, said: "UAE business activity continued to expand at a solid pace in July, as firms enjoyed another upturn in new work. The further reopening of the economy, including the lifting of curfew measures, helped to reinvigorate consumer spending. It was also particularly evident that future output sentiment depended on how demand recovered in the coming months, as firms hope that the economy will make strides back to pre-COVID-19 output levels over the second half of 2020."
The further easing of lockdown restrictions helped to improve customer demand and drive an upturn in new business at the start of the third quarter. Following June's expansion, the latest increase was unchanged and solid overall. However, firms saw some weakness in sales to foreign customers with new export orders falling modestly, erasing the gains made in June, IHS Markit said.
"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," Owen added.
While output and new orders rose further in July, hiring intentions among UAE businesses remained weak as employment declined for the seventh month in a row. Firms were reportedly able to cover the rise in new work with existing workforces, as signalled by a stable level of backlogs.
Company requirements to offset business costs led several respondents to cut payroll numbers, the survey said.
"Employment fell for the seventh month in a row, however, amid weak capacity pressures and efforts by companies to lower workforce costs. This acted as a drag on overall business conditions, as the headline PMI reading of 50.8 indicated just a marginal improvement," Owen said.
(Reporting by Seban Scaria; editing by Daniel Luiz)
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