Non-oil private sector continues on robust growth path

Dubai, October 5th, 2015: September data was consistent with another robust improvement in business conditions at UAE non-oil private sector firms. Higher output and new orders remained the key drivers of overall growth, supported by further rises in employment and input stocks. That said, the rate of hiring eased to a six-month low at the end of Q3, while growth of total new work was undermined by the first drop in foreign orders since May 2010. On the price front, a sharper rate of cost inflation was reflected in a renewed increase in output charges.

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

Commenting on the Emirates NBD UAE PMITM, Khatija Haque, Head of MENA Research at Emirates NBD, said.

"The strength of total new order growth is particularly encouraging, given the remarkable weakness in export orders last month, and in our view underlines the strength of domestic demand in the UAE even against a backdrop of low oil prices."

Key Findings

  • Marked expansions in output and new orders underpin improvement in business conditions
  • New export work falls for first time since May 2010
  • Jobs growth eases to six-month low

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 - posted 56.0 in September, down from 57.1 in August but still indicative of a solid improvement in business conditions. Growth has been relatively strong throughout the third quarter, with the respective average (56.3) coming in only just below the trend observed so far in 2015 (56.7).

Underlying data suggested that sharp rises in both output and new orders contributed to the strong performance of the sector as a whole. Despite easing slightly since August, the respective rates of expansion remained above their historical averages. Enhanced marketing strategies and reputations for quality were cited as factors behind growth of new business, which subsequently led to a rise in production during the month.

However, the expansion in total new orders was restricted by a fall in new export work during September. The latest decline was only slight, but it was the first seen in nearly five-and-a-half years. Some companies attributed weaker new business from abroad to greater competition.

Meanwhile, input buying rose for the sixty-second month in succession during September. The rate of growth eased to the slowest in three months, but remained faster than the long-run trend. Subsequently, pre-production inventories also increased.

Job creation was sustained in September, amid further growth of new business. That said, the latest increase in staffing levels was only modest overall, and the weakest since March. Backlogs of work continued to rise as a result, although the rate of expansion eased from August's record.

UAE non-oil private sector firms reported ongoing cost pressures in September, as total input prices rose for the sixth straight month. The rate of inflation was the steepest in almost a year, driven by higher salaries and purchasing costs.

Finally, average tariffs increased for only the second time in eight months. The latest rise was only marginal, however, as the passing through of higher input costs was partially offset by discounts offered in the face of strong competition. 

-Ends-

The next UAE PMI Report will be published on November 3rd 2015 at 09:30 (DUBAI) / 05:30 (UTC)

For further information, please contact:
Ibrahim Sowaidan 
Head - Group Corporate Affairs 
Emirates NBD 
Telephone: +971 4 609 4113 / +971 50 6538937 
e-mail: ibrahims@emiratesnbd.com

Tricia Rego            
ASDA'A Burson-Marsteller; Dubai, UAE         
Tel: 971-4-4507600; Fax: 971-4-4358040        
Email: tricia.rego@bm.com     

Khatija Haque
Head of MENA Research, Emirates NBD
Email: KhatijaH@emiratesnbd.com

Joanna Vickers                                                                        
Corporate Communications          
Markit
Tel: +44-207-260-2234                                                            
Email: joanna.vickers@markit.com                                          

Philip Leake
Economist
Markit
Tel: +44-1491-461014
Email: philip.leake@markit.com

The Emirates NBD UAE Purchasing Managers' Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in approximately 400 private sector companies, which have been carefully selected to accurately represent the true structure of the United Arab Emirates non-oil economy, including manufacturing, services, construction and retail. The panel is stratified by Standard Industrial Classification (SIC) group, based on industry contribution to GDP. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the 'Report' shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the 'diffusion' index. This index is the sum of the positive responses plus a half of those responding 'the same'.

The Purchasing Managers' Index™ (PMI™) is a composite index based on five of the individual indexes with the following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers' Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times index inverted so that it moves in a comparable direction.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease. Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.

About Emirates NBD
Emirates NBD is a leading banking Group in the region.  As at 30th June 2015, total assets were AED 388.1 Billion, (equivalent to approx. USD 105 Billion). The Group has a leading retail banking franchise in the UAE, with more than 220 branches and over 900 ATMs and CDMs in the UAE and overseas.  It is a major player in the UAE corporate and retail banking arena and has strong Islamic banking, Global Markets & Treasury, Investment Banking, Private Banking, Asset Management and Brokerage operations. 

The Group has operations in the UAE, Egypt, the Kingdom of Saudi Arabia, Singapore, the United Kingdom and representative offices in India, China and Indonesia.

The Group is an active participant and supporter of the UAE's main development initiatives and of the various educational, environmental, cultural, charity and community welfare establishments.

About Markit
Markit is a leading global diversified provider of financial information services. We provide products that enhance transparency, reduce risk and improve operational efficiency. Our customers include banks, hedge funds, asset managers, central banks, regulators, auditors, fund administrators and insurance companies. Founded in 2003, we employ approximately 4,000 people in 11 countries. Markit shares are listed on Nasdaq under the symbol MRKT. For more information, please see www.markit.com.

The intellectual property rights to the Emirates NBD UAE PMI™ provided herein are owned by or licensed to Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit's prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information ("data") contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index™ and PMI™ are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. Emirates NBD use the above marks under licence. Markit is a registered trade mark of Markit Group Limited.

© Press Release 2015