Flooding dents UAE business confidence but optimism remains

Reuters/Amr Alfiky

• Slowest order increase since 2023
• Temporary disruptions after floods
• Economic landscape still ‘robust’

Business and consumer confidence in the UAE was hamstrung by last month’s heavy rain and flooding, leading to the slowest increase in orders since February 2023, according to a business sentiment survey published on Friday.

Private business activity in the non-oil sector still showed significant growth in April amid a “robust” economic landscape and the positive impact of already-planned expansions, S&P Global found in its latest monthly UAE Purchasing Managers’ Index.

Growth was nevertheless below the post-pandemic record registered in February.

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“Backlogs of work increased considerably in April, which was linked to temporary business disruptions and elevated pressure on operating capacity,” Tim Moore, economics director at S&P Global Market Intelligence, said in a press statement. 

Tough competition for new contracts led to price discounting for the sixth month in a row. That came despite mounting costs for raw materials and rising employee salaries, according to the survey. 

The dynamic continues to squeeze operating margins, Moore said.

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“Higher levels of employment were recorded in April, driven by new project starts and resilient demand conditions,” he noted in the statement.

The rise in staffing numbers was the slowest since January, likely as a result of the downward pressure on margins. However, it helped keep the UAE’s job creation momentum going for the second consecutive year. 

Broader optimism over the UAE’s economic outlook remains, according to S&P Global.

“Non-energy businesses are nonetheless still highly upbeat about their year ahead growth prospects,” Moore said. “Many commented on strong sales pipelines and a swift recovery from the impact of heavy rainfall.”