UAE private business growth slow – but still solid: Report

The UAE’s non-oil private sector lost further growth momentum at the start of Q4, with business conditions improving at the least marked pace in two-and-a-half years, according to the latest PMI data.

The UAE Purchasing Managers’ Index (PMI) clocked 54 points in October, which is down from 56 points in September.

Dubai-based Emirates NBD bank, the sponsor of the survey, said in a media statement that this is indicative of a slower, but still solid, improvement in business conditions during October.

The survey, produced by Markit, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.

“The October PMI data supports our view that activity in the non-oil private sector of the UAE has slowed this year, with average PMI in the first 10 months of 2015 at 56.5, down from 58.1 in the same period last year,” said Khatija Haque, Head of MENA Research at Emirates NBD.

The latest reading is the lowest in two-and-a-half years, and is also below the average recorded since data collection began in August 2009 (54.6).

“Although the impact on headline real GDP growth is partially offset by higher oil production, the latest PMI data supports our decision to revise down our 2015 growth forecast for the UAE to 4 per cent (from 4.3 per cent previously) in September,” said Haque.

Underpinning the slowdown were weaker expansions in output and new orders, but the respective rates of increase were nevertheless robust overall.

Meanwhile, employment rose only modestly, as did stocks of purchases. On the price front, total input costs continued to increase solidly, while charges rose only marginally amid reports of competitive pressures.

Output and new business both showed similar trends to the headline index during October. The rates of growth were the slowest in 24 and 42 months, respectively, but remained sharp overall. Stronger market conditions, promotional activities and the opening of new branches were all mentioned as factors behind higher new work, while data signalled that a renewed increase in new export orders also contributed. As a result, panellists were motivated to raise their output further.

Reflective of slower growth of incoming new work, UAE non-oil private sector firms were more cautious with regard to their purchasing in October. Growth of buying activity eased for the second month running, leading to a weaker expansion in stocks of purchases. In fact, the rate of inventory building was the slowest observed since September 2013.

The overall loss of momentum was reinforced further by another modest rise in employment. The rate of job creation was muted in comparison with historical data and little-changed from the six-month low seen in September. Pressure on operating capacity meanwhile eased, with the latest rise in backlogs of work the weakest in the current 18-month sequence of accumulation.

Data for prices signalled a moderation in cost pressures faced by UAE non-oil private sector companies. Both salaries and purchasing costs rose more slowly in October, with the respective index for the former pointing to only a modest rise overall. That said, despite easing, the rate of total input price inflation remained solid and quicker than the average so far in 2015.

Higher costs were passed through to charges in October, although their impact was reportedly mitigated by increased competition. The rate at which tariffs rose was only marginal overall.

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