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Business conditions improve at weakest pace since August 2012
Dubai, January 7th, 2016
The UAE's non-oil private sector ended the year on a low note, with business conditions improving at the slowest rate in 40 months. Data showed that a key factor weighing on the sector as a whole was relatively muted growth of new work - the pace of expansion was the weakest since August 2011. Output, employment and input buying also rose more slowly, while charges decreased as firms competed to secure new clients.
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 PMI data point to weaker domestic and external demand in Q4 2015 which is reflected in lower readings for new orders, employment, output and the backlogs of work. Indeed for 2015 as a whole, the average PMI was lower than for 2014, signalling slower - but positive - growth in the non-oil private sector. However, softer non-oil growth in the UAE last year is likely to have been partially offset by robust oil sector expansion, and we remain comfortable with our estimate of 4.0% real GDP growth in 2015 down from 4.6% in 2014."
Key Findings
§ PMI sinks to 40-month low
§ Loss of momentum driven by slower rises in output, new work and employment
§ Competition for clients leads to further drop in charges
After adjusting for seasonality, the headline 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 - pointed to a loss of growth momentum in December. Falling from 54.5 in November to 53.3, the latest reading was the lowest since August 2012. Despite still signalling a solid improvement in business conditions, it meant that the fourth quarter was the weakest on average (53.9) since Q3 2012.
Underpinning the overall slowdown was a subdued expansion in new orders placed with UAE non-oil private sector companies. The latest rise was the least marked in nearly four-and-a-half years, albeit robust overall. New business from abroad followed a similar trend, with growth softening but remaining solid. Some panellists linked higher new work to improving market conditions both domestically and abroad, while others made reference to gains generated from marketing efforts.
Growth of new work was sufficient to motivate firms to raise their output further in December. The rate of expansion moderated in line with the headline index, though it remained slightly faster than the long-run average.
Another factor behind the overall easing was slower job creation at the end of 2015. Employment rose only modestly, as signalled by the respective index dropping below the 2015 average. Meanwhile, the level of unfinished work was unchanged in December, following a 19-month period of expansion. Data suggested that the absence of capacity pressures was at least partly due to the relative weakness of order books.
Input buying continued to rise in December, stretching the current upward trend to 65 months. The rate of growth eased, however, to the weakest since April 2013. Subsequently, stocks of purchases expanded at a slower pace.
On the price front, cost pressures remained modest in December. Both salaries and purchasing costs rose more slowly, thereby restricting the overall rate of input price inflation.
Data for charges pointed to something of a squeeze on UAE non-oil private sector businesses. Tariffs fell for the second month running, with some panellists commenting on the need to offer discounts in order to capture new business.
-Ends-
The next UAE PMI Report will be published on February 3rd 2016 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 September 2015, total assets were AED 390.4 Billion, (equivalent to approx. USD 106 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 2016
