UAE’s non-oil private sector witnessed both new work and export orders increasing at a strong rate last month but at a slower rate than in July, said Emirates NBD in its latest 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, Khatija Haque, head of Mena Research at Emirates NBD, said: “The decline in the headline PMI to 55.0 in August from 55.8 in July was largely due to a decline in average employment - the first time this has been recorded since the survey began in August 2009 - as well as lower stocks of inventories.  The softness in employment, which has been evident to some extent since 2016 but appears to have slowed even further this year, is surprising in the context of strong reported growth in output and new orders in the private sector over the same period.”

“In our view, the apparent lack of job creation year-to-date is likely due to cost containment and efficiency measures being implemented by firms in the face of a sustained squeeze on margins.  Although input costs were unchanged month-on-month in August, these have been rising over the last few years even as selling prices have declined on average.  Output prices declined again (albeit marginally) in August, for the fourth month in a row.

“The August PMI survey suggests that while activity in the non-oil private sector is expanding at a similar rate to last year, margin pressures on firms mean that this growth in new work and output is not translating to job creation or higher wages.  As a result, we retain our view that private consumption is unlikely to contribute significantly to GDP growth this year, with government spending and investment, and net exports likely to be the engines of growth,” Haque added.


The main findings of the August survey were as follows:
    
•    Headline PMI eases to 55.0, from 55.8 in July
•    New order growth falls to 20-month low
•    Job shedding reported for first time in survey history

The headline seasonally adjusted 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 – fell to 55.0 in August, down from 55.8 in July. The headline index remained above the neutral 50.0 mark, however, signalling an improvement in business conditions across the UAE’s non-oil private sector. That said, the latest expansion was the slowest since March.

Inflows of new business grew at a slower pace in August. The rate of improvement was the lowest recorded since December 2016. Furthermore, the latest expansion was below the series’ historical average.

Despite new order growth easing in the latest survey, output growth accelerated and remained sharp overall. Many firms linked higher output requirements to elevated backlogs of work and ongoing projects surrounding Expo 2020. Output growth has been recorded continuously since February 2010.

Continuing the sequence seen since April, new export orders rose once again during August. The rate of growth was marked overall and reflected stronger inflows of new business from neighbouring GCC countries.

On the price front, the vast majority of companies in the UAE’s non-oil private sector reported unchanged cost pressures since one month ago. Meanwhile, some firms reported price discounting, which was linked to promotional activity.

Optimism among businesses in the UAE’s non-oil private sector accelerated to a record high during the latest survey. Many firms linked business confidence to new product launches, projects surrounding Expo 2020 and marketing initiatives.

Despite improving business confidence, latest survey data signalled the first contraction in employment since the survey began in August 2009. The rate of decline was slight overall, with some firms linking job shedding to efficiency savings.

Stocks of purchases also fell during August. The rate of decline was slight overall. The contraction was the first recorded since April 2012. – TradeArabia News Service