Business activity will continue to increase in the UAE: Survey
DUBAI: Companies in the UAE remained optimistic that business activity will continue to increase over the course of 2019, according to the release of December data from the Emirates NBD Purchasing Managers’ Index (PMI) for the UAE.
The survey, compiled by IHS Markit, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.
Commenting on the UAE PMI survey, Daniel Richards, Mena Economist at Emirates NBD, said: Firms in the UAE’S non-oil private sector continued to expand their purchasing activity in response to growth of new orders and higher output requirements. Data suggested that purchased items were only used to support higher output, rather than also to build stock holdings.
Inventories of inputs decreased for the first time in four months, with some firms linking this to efforts to manage cash low more efficiently.
Companies remained optimistic that business activity will continue to increase over the course of 2019.
Optimism was based on expectations of improving economic conditions and success in securing additional sales over the next 12 months.
Firms cited expectations of successful sales drives to help boost output, suggesting that price discounting will remain necessary to boost output in 2019.
The latest expansion of business activity was solid overall as new orders increased again. The offering of discounts in a competitive marketplace reportedly contributed to rises in both activity and new business.
“The Emirates NBD Purchasing Managers’ Index (PMI) for the UAE is at 54.0 in December. This marked the slow pace of expansion in the non-oil private sector since October 2016, and has weighed on the 2018 average, which inished the year at 55.5, from 56.1 in 2017. Output was at 58.8 and new orders at 58.3. Although the PMI remains in expansionary territory (50.0 is the neutral level which delineates contraction and expansion), the subcomponents of the survey suggest that this is continuing to come at a cost to businesses’ margins, albeit to a lesser degree than seen in November.
Output prices did not fall as quickly in December as in the previous month — which was the fastest pace recorded since the 2009 recession — but they remained sub-50. Domestic competition led to sales promotions, according to irms surveyed, and a slower pace of growth in new export orders suggests that most of the growth in new orders was domestically driven.
The fall in output prices was mitigated somewhat by a slower pace of growth in purchase costs, which expanded at the slowest pace since August.
Nevertheless, the squeeze on margins is apparently still taking its toll on head count and pay; both employment and staff costs were broadly lat compared to a month earlier. Only 1.4 per cent of irms took on new staff while all respondents reported their stafing costs unchanged, maintaining a trend recorded throughout H2 2018.
Despite the squeeze on irms and dip in the headline reading, a sizeable majority of respondents (65.4 per cent) retain the view that output will be higher in 12 months’ time.
The headline igure relected smaller contributions from all ive constituent indices, suggesting a broad slowing of growth across the non-oil private sector at the end of 2018.
Selling prices were reduced for the third successive month, albeit modestly.
Companies were helped in the offering of discounts to customers by relatively weak input cost inflation. Overall input prices rose only marginally in December, with both purchase and staff costs broadly following the overall trend.