UAE - July data from the Emirates NBD Purchasing Managers’ Index (PMI) for the UAE has been released and was compiled by IHS Markit, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.

The Emirates NBD Purchasing Managers’ Index (PMI) for the UAE declined to 55.8 in July from 57.1 in June, signalling the slowest rate of growth in the non-oil private sector in three months. Both output and new work, while still strong, were softer than in June. Notably, new export orders increased at the sharpest rate in three years, as firms reported stronger demand from other GCC countries and Europe. Employment was broadly unchanged in July, with the index barely above the neutral level at 50.2. Year-to-date, the employment index averaged 50.8, compared with 51.2 in the same period last year, and indicating even weaker job growth in the UAE’s non-oil private sector this year relative to 2017. Backlogs of work increased sharply again as a result of the strong rise in new orders (and flat employment), although the rate of increase in backlogs was softer than in June,” said Khatija Haque, Head of MENA Research at Emirates NBD.

Haque added that while input cost inflation remained relatively modest in July compared with earlier this year, firms continued to lower average selling prices, with output prices declining for the third month in a row. The continued squeeze on firms’ margins is likely a key factor in the soft employment survey, as firms remain under pressure to contain costs and boost efficiency.

“Purchasing activity accelerated slightly in July but the actual stock of pre-production inventories was unchanged from June, which suggests that firms may be becoming more efficient in their inventory management. Overall, businesses remain very optimistic about the coming year, with more than 60 per cent of respondents expecting their output to be higher in a year’s time. However, this is lower than the May and June surveys,” she said.

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—fell to 55.8 in July, from 57.1 in June and the lowest reading in three months. The figure remained well above the neutral 50.0 mark, however, signalling a sharp improvement in business conditions across the non-oil private sector in July. The latest expansion was broadly in line with the average seen in the year-to-date.

Although output growth eased to a three-month low in July’s survey, the pace of expansion was sharp overall and well above the series’ historical average. Businesses in the non-oil private sector frequently noted that strong demand for goods and services led to higher output requirements.

New orders from abroad increased at the sharpest pace in three years during July. Many firms linked the improvement to a stronger demand climate in neighbouring GCC countries and Europe. In terms of overall new orders, growth eased to a four-month low, but remained solid in the context of historical data.

Reflecting robust inflows of new orders, backlogs of work increased at a steep pace during July. However, the rate of growth was slower than in June. Despite higher levels of work outstanding, firms hired additional staff at the slowest pace in over two years.

On the price front, the rate of input cost inflation remained muted and below the historical average. Purchase price inflation accelerated fractionally in July, whilst staff cost inflation softened to a 14-month low.

Promotional activity and intense competitive pressures across the UAE’s non-oil private sector led firms to reduce their selling prices for the third month running in July. The rate of decrease was moderate overall, although faster than that recorded in June.

Business confidence eased slightly from the survey-record high recorded in June. That said, the degree of optimism remained strong overall and the fourth-highest in the series’ six-year history.

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