Economy Drop in new orders slows non-oil business growth By Gavin Gibbon August 3, 2023, 9:25 AM Reuters/ Abdel Hadi Ramahi The UAE and Saudi Arabia both witnessed a slowdown in new orders in July among some non-oil businesses UAE new business growth slowed in July Saudi expansion challenged by rising cost of capital Kingdom fell into “technical recession” in Q2 after oil output cuts Non-oil business activity in the UAE and Saudi Arabia dropped in July as growth of new orders slowed. The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) for July hit 56.0, down from the high of 56.9 the previous month. Although it was well above the 50-point index mark, with anything below 50 indicating contraction, new order growth witnessed its steepest decline since 2009. David Owen, senior economist at S&P Global Market Intelligence, said the data “pointed to a slight recalibration of the strength of the UAE non-oil economy in July, as new business growth slowed from its four-year high in June and the output expansion subsequently lessened”. Oil cuts take $11bn bite out of Saudi exports Tax revenues fail to offset $4bn drop in UAE federal balance The GCC will need to make peace with inflation settling higher Approximately 30 percent of survey respondents noted an increase in output from the previous month, while there was a “moderate” rise in employment across the month. “At the outset, the July findings signalled that the UAE non-oil sector will continue on its expansion path in the second half of this year,” Owen said. “That said, the easing of sales growth was substantial and, if accelerated in future months, suggests that the demand boom could have reached its peak,” he added. The UAE’s non-oil GDP hit AED312 billion ($85 billion) in the first quarter of 2023, increasing 4.5 percent year on year, Abdulla bin Touq, minister of economy, said this week, quoting preliminary estimates from the Federal Centre for Competitiveness and Statistics. The Gulf state’s overall economy grew 3.8 percent to AED418.3 billion in Q1. A similar slowdown in new orders saw the seasonally adjusted Riyad Bank Saudi Arabia PMI fall to 57.7 in July, its lowest level since December, down from 59.6 in June. While overall output remained on a par with June, as companies caught up on unfinished work, new order growth was the slowest for seven months. “Rising cost of capital and intense competitive pressures are among the factors holding back new business expansion,” Naif Al-Ghaith, chief economist at Riyad Bank, said. Optimism among Saudi survey respondents in July was the second-lowest in 2023 so far, with some firms concerned about rising competition and difficulties stimulating demand. The kingdom fell into a “technical recession” in the second quarter of 2023, according to a report from London-based Capital Economics, on the back of its voluntary one million barrels per day (bpd) oil output cuts. Data showed the country’s GDP declined by 0.1 percent between Q1 and Q2, driven by the oil sector, which shrank by 1.4 percent. At this week’s Opec+ Joint Ministerial Monitoring Committee meeting, Saudi Arabia is expected to announce that it will roll over a voluntary output cut of one million bpd until at least the end of September. Oil rallied to a three-month high this week above $85 a barrel for Brent crude.
