Wednesday, June 19, 2019 10:48 AM

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UAE non-oil growth momentum loses stream UAE PMI shows

Growth momentum in the UAE’s non-oil private sector continued to ease pace at the end of the first quarter, with the latest data signalling the most muted expansion seen since May last year, according to UAE Purchasing Managers’ Index (PMI), supplied by Emirates NBD, the UAE’s largest lender.

“Easing new order, output and employment improvements, alongside stagnant foreign demand for goods and services contributed to the softer growth registered in March,” said a statement. “That said, the expansion remained above the historical average. In terms of costs, firms took advantage of easing price pressures by reducing output charges in an attempt to stimulate client demand.”

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.

Daniel Richards, MENA Economist at Emirates NBD,said: “Although the UAE’s PMI score continues to moderate from the pre-VAT boost enjoyed at the end of 2017, it remains firmly in expansionary territory, and continued discounting by firms should help stimulate demand. Firms are more positive towards future output than they were last month, reflecting new orders that remain strong at 60.2.”

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 – eased to 54.8 in March, down from 55.1 in February. The figure indicated a marked expansion overall, and one that was fractionally above the long-run average. That said, the rate of growth eased for the third month running, reaching a ten-month low in March’s survey.

Output growth softened to a 23-month low during the latest survey. That said, the rate of expansion remained marked overall. Some clients linked the rise to new project wins. Incoming new business remained in sharp growth territory, posting above the long-run average in March. The rate of expansion was at a four-month low, however.

Despite domestic new business growth remaining strong, orders from abroad deteriorated in the latest survey, thereby ending a three-month sequence of growth. That said, the rate of contraction was only fractional overall. According to anecdotal evidence, firms experienced challenging competitive pressures in foreign markets.

Private sector firms in the UAE’s non-oil private sector reported easing job creation during March. Moreover, the rate of employment growth slipped to a 17-month low.

In terms of inflation, price pressures eased further since the recent peak at the start of 2018. The rate of input cost inflation was marginal overall, and the weakest registered since May 2017. In line with easing cost pressures, businesses offered price discounting to stimulate client demand for the second month running. The rate of output charge deflation was modest overall in March.

Confidence in the non-oil private sector improved since February, and was strongly positive overall. New project wins alongside an expected global economic upturn underpinned positive sentiment in March.