UAE non-oil sector growth slows in Feb

dubai — The UAE non-oil sector growth eased in February to 5-month low with business conditions improving at the weakest pace since September 2017.

The Emirates NBD Purchasing Managers’ Index (PMI) for the UAE declined to 55.1 in February, driven by slower growth in output. The majority of firms reported no change in their output in February compared with the previous month, while more than 16 per cent of firms reported higher output.

New orders increased at a sharp rate last month despite weak export order growth, which points to strong domestic demand in the UAE in February, sais the survey released by Emirates NBD and IHS Markit.

“The February PMI survey shows a solid rate of growth in the UAE’s non-oil private sector, although it was slower than we’ve seen in recent months. The key components of the survey point to strong domestic demand but firms were notably more cautious than they were in January about the prospects for output growth over the coming 12 months,” said Khatija Haque, Head of Mena Research at Emirates NBD.

After picking up in January, employment growth slowed last month with less than two per cent of firms surveyed indicating they had boosted hiring last month.

Staff costs also moderated after rising sharply at the start of the year. Businesses in the non-oil private sector reduced selling prices on average in February, although the rate of decline was marginal, the survey results said.

Input cost inflation moderated in February as the impact of VAT was reflected in the January survey data. Purchasing activity was strong in February, with both the quantity of purchases and the stock of pre-production inventory rising at a sharp rate, revealed the survey results.

Despite the relatively solid output and new order data, business optimism about future output declined to 57.2 in February from 71.2 in January (we note that the January reading was an outlier).

Fewer firms expected their output to be higher in 12 months’ time compared with the January survey, when nearly 43 per cent of firms expected output to be higher in a year’s time.

Overall, Emirates NBD expects the non-oil sectors of the UAE to grow at a faster rate in 2018 as government increases spending on infrastructure projects and also on public sector wages and transfers.