According to a survey released on Wednesday, the rate of business activity growth in the UAE's non-oil sector slowed to a 16-month low in May as firms dealt with disruptions caused by April's record flooding, which resulted in the largest-ever increase in backlogs of work.

The seasonally adjusted S&P Global UAE Purchasing Managers' Index remained the same as April's eight-month low of 55.3 in May. Yet the reading surpassed the long-term average of 54.4, signalling a strong improvement in operating conditions.

“UAE non-oil companies continued to face relentless pressure on business capacity in May, as the latest PMI survey data signalled the largest-ever increase in backlogs of work,” stated David Owen, senior economist at S&P Global Market Intelligence.

He stated that although the increase in backlogs could be partly attributed to the record rainfall and subsequent flooding in April, capacity pressures were already at historic levels in March due to robust sales pipelines and supply chain challenges caused by the Red Sea crisis, Zawya reports.

Furthermore, the survey revealed that demand increased in May after companies experienced a slowdown in April due to the floods. However, despite the improvement from the previous month, the rise in total new orders was the second weakest since August 2023, the report indicated.

To bolster capacity, non-oil companies increased their staff levels in May, with the rate of job creation rising to a three-month top.

Purchasing growth also increased, hitting its highest point since last November due to strong sales pipelines and output needs. Additionally, some reports mentioned that firms needed to replace items damaged by the floods.

Moreover, the Dubai PMI fell to a 15-month low of 54.7 last month from 55.1 in April, as businesses reported a further activity growth slowdown.

New orders rebounded slightly after declining to a 13-month low in April, as certain firms noted an increase in client activity following disruptions caused by the floods.

In addition, inflationary pressures rose in May due to reports of elevated prices for raw materials and petrol. Overall input costs increased at the fastest rate since July 2022, resulting in the first rise in output prices during this period.

“As such, the focus for the next few months looks to be the recovery of the sector from this crisis. Nonetheless, with demand still strong, firms should be in a good position to resume their robust growth once capacity has been restored,” Owen added.