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Business conditions in the Middle East's largest city improved last month at the fastest pace in three years.
The Middle East saw a rapid expansion of its non-oil economy in June, according to a survey. The index rose to 56.1 from 55.7 in May and is well above the 50 mark that separates expansion from contraction.
David Owen, an economist at S&P Global, said that the index continued to trend upwards in June. The economy faced the challenge of rising inflationary pressures which resulted in the fastest increase in input prices since the start of the year.
Although less intense than in other parts of the world, cost pressures are on the rise in the oil-rich Gulf region, prompting countries like Saudi Arabia and the United Arab Emirates to set aside billions of dollars to support low-income citizens.
The growth in top two Arab economies can not be stopped by inflation.
Consumers are likely to feel the pinch of spending as fuel prices spike, as the sharp increase in global energy prices weighed heavily on businesses. It will become more difficult for firms to keep price increases to a minimum if cost inflation is sustained at a high level.
Data from the city's statistics center shows that consumer price inflation in May was 4.7%. Companies continued to take on the burden of higher prices in order to combat strong market competition.
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