Emirates NBD data found that business confidence has risen to a record high since it began tracking in 2012
Business confidence has risen to the highest recorded since 2012 despite slowing output growth, according to new October data from Emirates NBD’s purchasing managers index (PMI).
According to the data, output growth slowed to the weakest in six months, despite “relatively robust” new growth. Anecdotal evidence suggests that promotions and price discounts likely contributed to the rise in new orders.
Additionally, employment was found to have remained broadly flat in October after falling over the previous two months, with staff costs – a good proxy for wages – remaining largely unchanged.
“The softness in the labour market is at odds with output and new work growth,” explained Khatija Haque, head of MENA research at Emirates NBD. “However, the increased margin pressures in October likely contributed to firms’ reluctance to boost hiring.”
Business confidence was found to have risen to the highest recorded since the index began in 2012, with approximately 78 percent of firms indicating that they expected higher output in a year’s time.
“The surge in oil prices as well as announcements of increased government spending and Expo 2020 investment may have contributed to improved sentiment last month,” Haque said.
Input price inflation accelerated in October, at the strongest rate since April, while output charges fell following a slight rise in September. Many respondents linked the fall to competitive pressures in the non-oil private sector.
In neighbouring Saudi Arabia, employment and new order growth were found to have picked up in October, while new export orders grew in what Emirates NBD said was a reflection of increased external demand. However, output rose at the slowest rate since April.
Business confidence was also found to have risen, with half of firms surveyed expected higher output in a year’s time. Emirates NBD noted that the rise in Brent oil prices and the government’s signalling of increased budget spending also likely contribute to improved business sentiment.