Tuesday 19 March 2024
 
»
 
»
JOB CREATION SLOWS

Output, new orders and input stocks all rose
more slowly in the UAE.

UAE, Saudi show weakest non-oil growth in 3 months

DUBAI/RIYADH, May 3, 2016

The non-oil private sector in the United Arab Emirates and Saudi Arabia lost some growth momentum in April, with business conditions improving at the weakest pace in three months, a report said.

UAE

Output, new orders and input stocks all rose more slowly, but the main drag on the sector was a stagnation in employment. It was only the second time that payroll numbers had failed to rise in the survey’s history, according to the survey, sponsored by Emirates NBD and produced by Markit.

Meanwhile, cost pressures remained subdued and charges continued to fall. Greater competition was again cited as the main driver of lower tariffs.

Commenting on the Emirates NBD UAE PMI, Khatija Haque, head of Mena Research at Emirates NBD, said: “Growth momentum in the UAE slowed a little in April after rebounding in March.  External demand remains relatively subdued, and firms appear to be reluctant to increase hiring, despite solid growth in new orders and output last month.  The PMI data year-to-date points to slower, but still positive, growth in the UAE’s non-oil sector, which is in line with our expectation for slower real GDP growth in 2016.”  

Key findings

•    Slower growth of output and new work
•    Employment stagnates, ending 51-month period of job creation
•    Tariffs fall for sixth month running

The seasonally adjusted headline Emirates NBD UAE Purchasing Managers’ Index™ (PMI) – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – posted 52.8 in April, down from March’s four-month high of 54.5. Though still consistent with a solid improvement in business conditions, the latest reading was only just above the near-four year low seen in January. It was also below the Q1 average (53.4), which was the weakest since the opening quarter of 2012.

A stagnation in payroll numbers at UAE non-oil private sector firms was a key factor behind the overall slowdown in growth. Employment was unchanged following 51 successive months of job creation. Moreover, April was just the second month since data collection began in which staffing levels had failed to rise.

In contrast, both output and new orders increased solidly in April. Enhanced marketing strategies and discounted prices had reportedly helped companies to secure new business, and activity rose in turn. That said, the respective rates of expansion were slower than in March. Data showed that growth of total new work was weighed down by lower exports for the second straight month. The latest decline in new business from abroad was only marginal, however.

With new business rising and employment remaining unchanged, backlogs of work increased for the fourth straight month in April. The rate of accumulation picked up since March but was still modest overall.

Reflective of the slower expansion in new orders, growth of purchasing activity eased in April. In fact, the increase was the least marked in three years. Some panellists indicated that they had sufficient inventories, and this was borne out by data which showed input stocks rising at the slowest pace since September 2013.

On the price front, the rate of input cost inflation remained historically muted in April. In particular, purchase prices rose to the least extent in three months. Relatively weak cost pressures enabled firms to cut charges again. The latest fall was the sixth in as many months. There were reports that greater competition had led companies to reduce their tariffs.  

Saudi Arabia

Output continued to rise sharply, but the rate of job creation eased to near-stagnation. New business increased to the least extent in the survey’s history, weighed down by a first drop in exports since data collection started in 2009, the survey said.

On the price front, charges nearly stabilised as rises stemming from higher input costs offset cuts generated by increased competition.

“Saudi Arabia’s PMI has been broadly stable around 54 since the start of this year, signalling steady growth in the non-oil private sector,” Haque said.

“Both new orders and output continue to rise at a robust rate, despite weaker external demand. Firms were more cautious with hiring in April, with jobs growth at a four-month low.”

Key findings

•    Business conditions improve at weaker pace
•    Falling exports contribute to slowdown in growth of total new work
•    Sharp expansion of output, but employment barely rises

At 54.2, the headline seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) – a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy – was consistent with a solid improvement in business conditions in April. That said, the latest reading suggested that growth of the non-oil private sector as a whole remained at a relatively low ebb. It was down slightly from 54.5 in March, and only just above the survey-record low seen in January (53.9).

In line with the overall trend, growth of new orders slowed in April. The increase was the least marked in the series history, albeit still solid overall. Whereas some panellists continued to mention improving client demand and better marketing as factors behind higher new work, others suggested that they had lost out due to greater competition. Lower exports also undermined total new business – the fall in new work from abroad was a survey-first.

The relatively subdued rise in new orders barely motivated firms to add to their staffing levels in April. Employment rose only slightly, with the vast majority of respondents seeing no change since March. Backlogs of work increased further, but at the slowest pace in the current 39-month sequence of growth. Some companies said that they had become more efficient in production.

Output remained a bright spot in April. Though below the long-run average, the latest expansion was sharp and the second-strongest in five months. According to anecdotal evidence, higher activity was a result of projects that were either new or ongoing.

Meanwhile, purchasing activity at Saudi Arabia’s non-oil private sector businesses continued to rise, extending the current upturn which has run throughout the survey’s history. The rate of growth eased, however, and was among the weakest on record. As a result, input stocks rose only modestly.

Total cost pressures remained muted in the context of historical data in April. Despite picking up slightly since March, the rate of inflation was only modest, dampened by a first drop in salaries since the series began in August 2009. Nonetheless, the rise in overall input prices reportedly had an impact on firms’ charges. After five successive months of decline, tariffs broadly stabilised as higher costs offset competitive pressures.  – TradeArabia News Service




Tags: Saudi Arabia | UAE | Emirates NBD | PMI | Non-oil growth |

More Finance & Capital Market Stories

calendarCalendar of Events

Ads