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UAE businesses increase prices to protect margins

A construction site in Dubai. Companies are increasing prices due to rises in wages and the cost of material Alamy via Reuters
A construction site in Dubai. Companies are increasing prices due to rises in wages and the cost of material
  • Companies ‘feeling the pain’ says S&P
  • Material and shipping costs rise
  • Non-oil sector growth slows

Companies in the UAE were forced to hike prices for a second month in succession in June, according to the latest business sentiment survey from ratings agency S&P Global.

S&P attributed the sharp rise in input prices to material costs, shipping fees and overheads. Wages also grew marginally throughout the month, leading to the fastest increase in average prices charged since April 2018. 

“With reports of swelling competition in some sectors, firms are keen to retain their competitive edge, which makes the latest rise in prices even more indicative that businesses are feeling the pain on their balance sheets and having to protect their margins,” said David Owen, senior economist at S&P Global Market Intelligence.

The seasonally adjusted S&P Global UAE Purchasing Managers’ Index fell to 54.6 in June from 55.3 in May, the lowest since February 2023, although any score above 50 still indicates growth in market activity.

Growth in the country’s non-oil sector has slowed throughout 2024, with the index losing roughly three points since last December.

The Central Bank of the UAE last month revised its project inflation rate for 2024 down to 2.3 percent for the year, from its previous estimate of 2.5 percent.

Companies continued to see backlogs of work but the pace at which they accumulated was the least marked for four months, due in part to a speedier supply of raw materials, the agency said.

“The recent surge in backlogs of work is also showing signs of easing, a trend that is likely to continue as the country recovers from April’s floods and supply chains adapt to the current situation in the Red Sea,” said Owen.

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