DUBAI (Reuters) - The United Arab Emirates' non-oil private sector grew in July at its second-fastest pace this year as business activity picked up on strong demand and higher sales amid some discounting, a business survey showed on Wednesday.
The seasonally adjusted S&P Global (NYSE:SPGI) UAE Purchasing Managers' Index (PMI) rose to 55.4 in July from 54.8 in June, slightly lower than May's 55.6 reading - the fastest pace of growth this year. It remained well above the series average since 2009 of 54.1.
The output subindex rose to 62.5 from June's 60.7, the joint-highest for the year and above the series average of 57.5.
"UAE non-oil companies started the third quarter on a stronger footing, according to July's PMI data," wrote David Owen, economist at survey compiler S&P Global Market Intelligence.
"With demand strengthening, operating capacities came under pressure, but businesses reacted to this squeeze by continuing with their hiring efforts."
The employment subindex dipped to 51.0 in July from 51.2 in June, remaining below the series average of 51.3. The subindex has expanded for 14 straight months with the exception of April.
"The biggest challenge facing UAE non-oil businesses is inflation. While the latest results pointed to a softer upturn in overall input costs, the rate of increase was nevertheless the second-strongest in four-and-a-half years amid global shortages of inputs and greater prices for fuel, materials and shipping," Owen said.
"Once again, firms opted to absorb additional cost burdens and cut their prices in line with intense competition for new work. The rate of discounting eased and was only fractional, however, indicating that some firms may be prepared to hike their charges in coming months."
Sentiment for output over the next year among firms surveyed fell to a 10-month low.