UAE private sector growth moderates on lower output
dubai — Non-oil private sector growth in the UAE moderated to a three-month low in July on the back of softer output and new work, Emirates NBD said in a report.
The Emirates NBD Purchasing Managers’ Index (PMI) for the UAE declined to 55.8 in July from 57.1 in June, signalling the slowest rate of growth in the non-oil private sector in three months, the bank said in its survey report.
The survey, compiled by IHS Markit, said although output growth eased to a three-month low in July’s survey, the pace of expansion was sharp overall and well above the series’ historical average. “Businesses in the non-oil private sector frequently noted that strong demand for goods and services led to higher output requirements.”
Khatija Haque, head of Mena research at Emirates NBD, said both output and new work, while still strong, were softer than in June. “Notably, new export orders increased at the sharpest rate in three years, as firms reported stronger demand from other GCC countries and Europe.”
In terms of overall new orders, growth eased to a four-month low, but remained solid in the context of historical data, said the report.
Backlogs of work increased at a steep pace during July, reflecting robust inflows of new orders. “However, the rate of growth was slower than in June. Despite higher levels of work outstanding, firms hired additional staff at the slowest pace in over two years,” it said.
The job situation was broadly unchanged in July, with the index barely above the neutral level at 50.2. Year to date, the employment index averaged 50.8, compared with 51.2 in the same period last year, and indicating even weaker job growth in the UAE’s non-oil private sector this year relative to 2017. Backlogs of work increased sharply again as a result of the strong rise in new orders, although the rate of increase in backlogs was softer than in June.
Purchasing activity accelerated slightly in July but the actual stock of pre-production inventories was unchanged from June, which suggests that firms may be becoming more efficient in their inventory management.
In July, compared with earlier this year, firms continued to lower average selling prices, with output
Businesses remain very optimistic about the coming year, with more than 60 per cent expecting their output to be higher in a year’s time
Emirates NBD
prices declining for the third month in a row. The continued squeeze on firms’ margins is likely a key factor in the soft employment survey, as firms remain under pressure to contain costs and boost efficiency.
“Overall, businesses remain very optimistic about the coming year, with more than 60 per cent of respondents expecting their output to be higher in a year’s time. However, this is lower than the May and June surveys,” said the report.
Business confidence eased slightly from the survey-record high recorded in June. However, the degree of optimism remained strong overall and the fourth highest in the series’ six-year history, it said.