UAE private sector continues to expand but growth in October at a slower pace

The UAE’s non-oil private sector economy continued to expand in October, although at a slower rate than the previous month, while business conditions in Saudi Arabia registered an improvement during the period, according to new surveys.

The seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – fell to 55 in October, from 55.3 in September.

A reading below 50 indicates that the non-oil private sector economy is declining; above 50, it is expanding. A reading of 50 signals no change.

The latest expansion remained marked overall and above the historical average, Emirates NBD said. The survey is sponsored by Emirates NBD, Dubai’s biggest lender, and produced by IHS Market.

Non-oil private sector companies in the UAE reported another increase in new business and new order growth last month, possibly linked to higher promotional activity, the bank said. Levels of business confidence were at a record high.

However, output growth was the weakest in six months, the survey showed, and new orders from abroad grew at the slowest pace since March.

“The headline PMI has been broadly stable between 55 and 56 for the last four months, indicating growth in the UAE’s non-oil private sector at a similar rate to last year, when official GDP data showed the non-oil sector expanded 2.5 per cent,” said Khatija Haque, head of Mena research at Emirates NBD.

Employment was broadly flat in October after declining in the previous two months. This trend is at odds with output and new work growth, but increased margin pressures last month are likely to have contributed to companies’ reluctance to boost hiring, Ms Haque said.

Meanwhile in Saudi Arabia, the October PMI stood at 53.8, up from 53.4 in September thanks to a rise in new orders driving economic expansion despite lower output growth.

“The latest expansion was moderate and above that recorded in September, although it remained weak in the context of historical data,” Emirates NBD said.

Stronger inflows of business in domestic and foreign markets contributed to the latest expansion, and foreign demand improved after a deterioration in September, the survey found.

However, output growth eased to a six-month low and was the third-weakest since the survey’s inception in August 2009 – although it remained above the 50 “no change” mark.

The fall in October was the first in average cost burdens faced by non-oil private sector businesses since the survey began. However, the rate of decline was slight overall and linked to competitive pressures among input suppliers and declining wage bills.

Business confidence concerning future growth prospects hit a 58-month high. Nonoil private sector businesses increased their payroll numbers at the fastest rate in seven months to service the increase in new order inflows, and as sentiment improved.