UAE non-oil private sector growth slows as inflation bites -PMI

DUBAI (Reuters) – Business activity in the United Arab Emirates non-oil private sector retreated to its slowest pace in five months in June though growth remained positive for the 19th consecutive month, a survey showed on Tuesday.

The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) fell to 54.8 in June from 55.6 in May, its lowest level since April as inflation weighed on the non-oil economy.

A reading above 50.0 on the index indicates growth.

Inflationary pressures are widespread across the UAE’s non-oil economy, according to the PMI data, with sharp rises in fuel prices driving up costs for businesses in the oil-rich nation.

Purchases slowed down and stockpiling was reduced as input costs rose at their fastest pace in 11 years, the data showed.

“UAE businesses came under increased pressure from rising input costs in June, as a surge in fuel prices drove the fastest rate of cost inflation in exactly 11 years,” said S&P Global Market Intelligence economist David Owen.

“The ratio between the Input Price and Output Price Indices was the highest on record, signalling that price rises for customers are likely in the coming months.”

However, the outlook for future activity remains positive despite the concerns that inflation will hit spending.

Output, which measures business activity, fell to 60.7 in June from 62.5 in May, ending two consecutive months of accelerating growth to hit its slowest since February.

The employment sub-index rose marginally to 51.2 from 50.7 a month earlier, its highest level since August as businesses added capacity. Some employers have had to offer higher wages to hire and retain staff as average wages rose to their highest in four years.

The new orders sub-index continued to expand for the 16th consecutive month, though were lower than the prior two months, while output prices fell for a second consecutive month, which was the strongest decline since November last year.

(This story corrects to remove extraneous word from headline.)

(Reporting by Alexander Cornwell; Editing by Catherine Evans)