SLIGHT GROWTH IMPROVEMENT FOR UAE’S PRIVATE SECTOR IN SEPTEMBER

Saudi counterpart was slower in the same period as job market in both economies remained sluggish

Growth in the UAE’s non-oil private sector economy increased slightly in September, while activity in Saudi Arabia slowed down as the two biggest Arab economies suffered from a sluggish job market, according to new surveys.

The UAE’s seasonally adjusted Purchasing Managers’ Index – a composite indicator designed to give an overview of operating conditions in the non-oil private sector – climbed to 55.3 in September from 55 in August. A reading above 50 suggests the economy is growing, while a reading below 50 indicates a contraction.

The September data indicated a further rise in UAE output. The rate of growth remained sharp and above the historical average, but it did slip to a fivemonth low in the latest survey, compiled by Emirates NBD and produced by IHS Markit, a financial information services company.

“Backlogs of work rose again in September – unsurprising given strong output and new work growth with no increase in employment – but at the slowest pace since May,” said Khatija Haque, head of Middle East North Africa research at Emirates NBD.

Business confidence among the purchasing managers remained strong in the survey period. Projects related to Expo 2020, successful product launches and planned business expansions underpinned optimism towards future growth prospects.

Payroll numbers across the non-oil private sector decreased for the second month running in September, the first consecutive monthly decline in employment since the survey’s inception in August 2009. Nonetheless, the rate of job shedding eased since August and was only marginal overall.

Inflows of new business improved during September. The rate of growth was steep and above that recorded in August. Survey data inferred that part of the increase in growth was driven by stronger foreign demand, which increased for the sixth month running.

Meanwhile, the Saudi non-oil sector growth cooled off, slipping to reach its slowest pace in four months as activity was dragged down in part by a decline in output and new orders.

The Emirates NBD PMI for Saudi Arabia eased to 53.4 in September down from 55.1 in August.

“The decline was due to softer growth in output and new orders, with new export orders contracting last month. Employment and inventory growth were also weaker in September, weighing on the headline PMI,” Ms Haque said.

The employment index for the kingdom fell to 50.7 in September, the lowest since November 2017, as nearly 97 per cent of companies surveyed indicated no change in staffing last month. Staff costs – a proxy for wages – declined marginally for the first time since April 2016, she said.

Companies also cut selling prices for the third month in a row in September even as input costs rose. However, the rate of producer price inflation eased from August, Ms Haque said.

Despite the softness in the September survey, the PMI for the third quarter was still higher than the first two quarters of this year. However, that did not translate into faster employment growth.

“The September survey data points to slower growth in the non-oil private sector, which is surprising given the backdrop of rising oil prices and sharply higher oil production since June,” said Ms Haque.

“However, we remain optimistic that sustained higher oil production will support faster expansion in the nonoil sectors in Q4, particularly manufacturing, transport and logistics.”