Wednesday, June 19, 2019 11:14 AM

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UAE non-oil private sector growth cools to five-month low

Growth of the UAE’s non-oil private sector eased in February, with business conditions improving at the weakest pace since September last year, according to UAE Purchasing Managers’ Index (PMI), a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy.

“The sector’s slowdown was largely reflective of a marked easing in output growth, alongside softer job creation. Weaker growth weighed on business confidence, which registered at a six-month low after falling sharply since the start of 2018. That said, demand conditions remained strong during February, as indicated by steep new order growth and the third consecutive month of rising new export business,” it said.

The survey, sponsored by Emirates NBD and produced 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 February PMI survey shows a solid rate of growth in the UAE’s non-oil private sector, although it was slower than we’ve seen in recent months.  The key components of the survey point to strong domestic demand but firms were notably more cautious than they were in January about the prospects for output growth over the coming 12 months.”

The headline seasonally adjusted EmiratesNBD UAE PMI eased to 55.1 during February, from 56.8 in January. The reading signalled the slowest improvement in business conditions for five months, matching that registered in September last year. That said, the rate of expansion remained sharp overall and above the long-run average.

Output growth in the non-oil private sector eased to a nine-month low during February. The rate of expansion remained sharp overall, however, and broadly in line with the series’ historical average. Some firms noted that strong demand led to higher output requirements, it said.

“Non-oil private sector firms reported an uptick in new business in the latest survey. The rate of growth accelerated since January and was sharp overall. Furthermore, February’s expansion was slightly above the average seen over course of 2017,” the report said. “Supporting the improvement in domestic demand, new orders from abroad continued to rise for the third month running. That said, the rate of growth was only slight overall.”

Job creation continued in the non-oil private sector, thereby extending the current sequence of employment growth to 22 months. That said, the rate of growth eased to its slowest since June 2017 and was subdued in the context of historical data.

In terms of cost pressures, input price inflation eased since the preceding survey. Despite the rate of inflation being solid overall during February, it fell below the long-run average. Meanwhile, output charges returned to decline in February’s survey. According to anecdotal evidence, the reduction in cost pressures allowed firms to reduce prices to stimulate client demand.

Business confidence among non-oil private sector firms in the UAE deteriorated sharply since January. The overall level of optimism was also well below the historical average.