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Tue 4 Jul 2017 09:43 AM

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'Intense competition' forces UAE firms to further cut prices

Emirates NBD’s monthly survey of private, non-oil businesses says improved health is due to discounts and more marketing

'Intense competition' forces UAE firms to further cut prices
(Getty Images)

UAE businesses are reducing the selling price of their goods in an effort to support demand and order growth, according to Emirates NBD.

The bank’s monthly assessment of private non-oil sector activity shows a sharp improvement during June, off the back of a six-month low in May, thanks to a combination of more projects, an increase in new orders and favourable economic conditions.

However, firms contributed the rise in new business activity to discounts and greater marketing efforts.

Intense competition was forcing them to continue to offer low-cut prices despite increased cost pressures, Emirates NBD said.

At the same time, new export orders fell for the first time in seven months during June and employment growth was weak, falling to an eight-month low.

“The rise in output and new orders in June is encouraging, although we note that firms continued to reduce selling prices on average in order to support demand and order growth,” Emirates NBD head of MENA research Khatija Haque said.

“The survey also highlights the lack of employment growth despite strong the strong increase in new work last month.”

The headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy) rose from May’s six-month low of 54.3 to 55.8 in June.

Off the back of May’s decline, the rate of growth in June was stronger than the long-run series average of 54.5.

“Overall … the PMI data for H1 2017 supports our view that the non-oil sectors have grown at a faster pace relative to H1 2016,” Haque said.

Yet, business confidence on a 12-month outlook eased to the second-lowest in the survey’s history.

Firms expect projects in the pipeline and further improvements in economic conditions will lead to output growth in the year ahead.

The Emirates NBD UAE Purchasing Managers’ Index is produced by IHS Markit.