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Thu 10 Jan 2019 02:13 PM

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UAE private sector growth slows to two-year low

New business survey says squeeze on margins is taking its toll on head count and pay in the UAE

UAE private sector growth slows to two-year low
The Emirates NBD Purchasing Managers’ Index for the UAE fell to 54.0 last month, its slowest pace of expansion since October 2016.

Private sector growth in the UAE slipped to its slowest rate for more than two years in December, according to a new survey.

The Emirates NBD Purchasing Managers’ Index (PMI) for the UAE fell to 54.0 last month from 55.8 in November, its slowest pace of expansion since October 2016.

On average, the PMI score reached 55.5 during 2018, down from 56.1 in 2017.

Daniel Richards, MENA economist at Emirates NBD, said: “Although the PMI remains in expansionary territory, the subcomponents of the survey suggest that this is continuing to come at a cost to businesses’ margins, albeit to a lesser degree than seen in November."

He said domestic competition led to sales promotions, according to firms surveyed, and a slower pace of growth in new export orders suggests that most of the growth in new orders was domestically driven.

He added that a squeeze on margins is apparently still taking its toll on head count and pay - both employment and staff costs were broadly flat compared to a month earlier.

Only 1.4 percent of firms took on new staff while all respondents reported their staffing costs unchanged, maintaining a trend recorded throughout the second half of 2018.

Despite this, a sizeable majority of respondents (65.4 percent) retain the view that output will be higher in 12 months’ time, while only 5.2 percent expect conditions to deteriorate.

The latest expansion of business activity was solid overall as new orders increased again, but slower than that seen in November. New orders rose at the weakest pace since August. The offering of discounts in a competitive marketplace reportedly contributed to rises in both activity and new business.

Selling prices were reduced for the third successive month, albeit modestly. Companies were helped in the offering of discounts to customers by relatively weak input cost inflation. Overall input prices rose only marginally in December, with both purchase and staff costs broadly following the overall trend.

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