UAE companies raised prices at the fastest rate in more than 15 years. Orders still grew.
The UAE non-oil PMI, a monthly survey where any reading above 50 means growth, held at 55.3 in September, a 20-month high. Orders from abroad rose at the strongest rate in nearly two years, and companies passed higher costs on to customers without losing them.
The UAE's non-oil private sector grew at the same pace in September as it did in August, and that pace is the fastest in 20 months. The S&P Global UAE PMI, a monthly survey of around 1,000 non-oil private sector companies in which any reading above 50 means growth, came in at 55.3 for the second month running, according to figures published on 5 October.
Two numbers inside the survey matter more than the headline. The first is export demand. New orders from abroad rose at the strongest rate in nearly two years, and output grew at the fastest pace since February, before the regional conflict that pushed the index down to 50.8 in June. The second is price. Companies raised their selling prices at the fastest rate since May 2011, after months of higher raw material and freight costs, and customers kept ordering.
S&P Global's economist for the survey, David Owen, read the price rise as companies rebuilding margins after months of rising costs. He also warned that oil prices and shipping routes are still unsettled, so costs, and the prices companies charge, could stay high for a while.
Hiring is the cautious part of the picture. Employment rose modestly in September after falling in August, but S&P Global described hiring as subdued, and backlogs of work built up as companies took on more orders than they added staff to handle. S&P Global also called companies' confidence about the year ahead subdued.
Dubai moved faster than the country as a whole. The Dubai PMI rose to 54.5 from 54.1, its highest reading in seven months, and business activity in the emirate grew at the fastest pace so far this year. Orders from abroad grew at the fastest rate in two years, companies in the emirate started hiring again, and Dubai businesses raised their prices faster than at any point since January 2014.
For a founder the reading is practical. Demand has recovered from the mid-year dip, and it has recovered abroad as well as at home, which is the half of the market many small UAE companies never sell to. Pricing is the second signal. If your rates have not moved since the spring while your suppliers' rates have, the survey says the market has absorbed increases from your competitors already. The third is staffing. Companies are growing orders faster than headcount, which is why backlogs are rising, and that is the gap a small firm with capacity can sell into.
The PMI is a survey of sentiment and activity, not a measure of revenue, and one month does not make a trend. But two months at a 20-month high, with exports leading, is the clearest signal since the conflict that the non-oil economy is back on its earlier track.