Latest Emirates NBD data shows that the UAE PMI has fallen to a near two year low, signaling sluggish economic growth
UAE non-oil private sector economy dropped to a 22-month low of 54.7 in June, down from 56.4 in May
Non-oil private sector firms in the UAE reported the weakest improvement in business conditions since August 2013 during June. Marked slowdowns in growth of output and new business were at the forefront of the overall deceleration, while employment continued to rise at a solid pace. Meanwhile, inflationary pressures from both input costs and output charges were negligible.
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 PMI, Khatija Haque, Head of MENA Research at Emirates NBD, said.
“Although the June PMI data was the softest in two years, it signals solid growth in the non-oil private sector. Furthermore, it is difficult to determine whether the softening will continue into Q3, particularly when bearing in mind the Islamic calendar. We attribute some of the slowdown in the June data to the start of Ramadan, and we would expect to get a clearer picture of underlying growth momentum later in the year.”
– Output rises further, but rate of expansion eases sharply
– New orders increase at slowest pace since April 2012
– Cost pressures ease for second month running
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 – dropped to a 22-month low of 54.7 in June.
Down from 56.4 in May, the latest reading contributed to the weakest quarter of growth since Q3 2013 (56.0). That said, the rate of improvement remained faster than the series average and solid overall.
Latest data indicated that the overall slowdown was mirrored by weaker expansions in output and new orders during June. Activity growth eased to a 20-month low, while new work inflows rose at the slowest pace since April 2012. However, the respective rates of increase remained marked overall. According to panellists, improved marketing strategies, new client wins and new product launches all helped to boost demand conditions, which in turn led to another expansion in output.
A weaker rise in new export work contributed to slower growth of total new business in June. The latest increase was the weakest since the end of 2013, but remained broadly in line with the average recorded over nearly six years of data collection.
Similarly, UAE non-oil private sector firms raised their input buying more slowly in the latest period. Although solid overall, the rate of expansion was the least marked in nearly two years. Subsequently, pre-production inventories rose only modestly.
Meanwhile, the rate of job creation was little-changed from the solid pace seen in the previous two months during June. Those companies that hired additional staff commented on the opening of new branches and efforts to expand operating capacity.
Total input costs faced by UAE non-oil private sector businesses increased for the third straight month in June, albeit only fractionally. The rate of inflation was muted relative to the long-run trend, helped by slower rises in both purchase prices and staff costs in the latest period.
Nonetheless, higher input prices were reported to have driven average tariffs upwards during June. Output charges rose for the first time since January, although the rate of inflation was only slight. According to anecdotal evidence, competitive pressures continued to restrict firms’ pricing power.