The United Arab Emirates' non-oil economy witnessed slowing growth in July, according to new data.

The Emirates NBD UAE Purchasing Managers' Index (PMI) dropped to 55.8 in July, down from 57.1 in June, which was the slowest rate of growth for three months.

The PMI gives an overview of operating conditions in the non-oil private sector economy of a country, with a figure of less than 50 indicating the market is declining and a figure of above 50 forecasting growth.

Non-oil growth remains well above the 50.0 mark, and the July figure was broadly in line with the average growth rate for the year-to-date.

In a press release accompanying the the publication of the UAE data on Sunday morning, Emirates NBD's head of MENA Research, Khatija Haque, said: "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," Haque added. "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."

Saudi Arabia's non-oil economy also slowed fractionally in July to 54.9, down from 55.0 in June. Job creation also remained subdued, the Saudi PMI index found, and was only marginally above the neutral 50.0 mark representing employment growth.

As a result, Haque said there was "very little evidence of wage growth in Saudi Arabia’s private sector".

Things were slightly more positive in Egypt, with the PMI data moving into positive territory in July to 50.3, following a 49.4 contraction figure for the country's non-oil economy in June.

The Egyptian index stated that improvements in inbound tourism fuelled a growth in exports, but said that raw material costs were rising and staffing levels continued to fall.

Daniel Richards, a MENA economist at Emirates NBD, said of the Egyptian data: “The positive PMI reading for the first month of the new fiscal year supports our view that real GDP growth will strengthen in 2018/19 as there is a greater recovery in the private sector, supported by gradual monetary policy normalisation, improved political stability and a rebound in the tourism sector.”

In a note published on Thursday evening, London-based Capital Economics said that with evidence of easing inflation in Egypt (the headline rate fell to 13.5 percent in July, down from 14.4 percent in June), it expects that "inflation has further to fall", which should give the Central Bank of Egypt room to continue its monetary easing policy later this year.

"Overall, we think the overnight deposit rate will be lowered to 13.25 percent by the end of this year, which is more easing than the consensus currently expects."


Further reading:

(Writing by Michael Fahy; Editing by Shane McGinley)

Our Standards: The Thomson Reuters Trust Principles

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2018