Slowdown reflects market conditions and competitive pressures, according to Emirates NBD
Operating conditions in the UAE’s non-oil private sector economy dropped to a 28-month low in February, according to the seasonally adjusted Emirates NBD Purchasing Managers Index.
According to Emirates NBD, anecdotal evidence suggested that the slowdown reflected market conditions and competitive pressures, which collectively led new orders to rise to the least extent since October 2018.
Additionally, the rate of output growth also eased in February and was softer than that seen on average through 2018.
The data suggests that companies responded to signs of weaker new order inflows by reducing staff levels, with the rate of job shedding the most marked in the survey’s history.
“Some firms reported operating with the minimum level of staffing in a bid to keep costs down," said Khatija Haque, the head of MENA research at Emirates NBD.
Efforts to limit increases in operating expenses were generally successful as both purchase prices and staff costs rose only marginally, which allowed companies some leeway on selling prices. Anecdotal evidence also suggested that competition led many to offer discounts.
Despite the slowdown in new orders, backlogs of work increased at an accelerated pace in February, with some panellists reporting difficulties in obtaining payments from customers which led to delays in project completions.
Supply chain issues were also evident as vendor delivery times improved to the least extent in the survey’s history.
The rate of expansion in purchasing activity was found to have accelerated, which led to the first rise in inventories in three months. However, stocks of purchases increased only slightly.
Lastly, the current market environment led to a sharp drop in sentiment regarding the 12-month outlook among UAE non-oil companies. Firms, however, remained optimistic that business conditions will improve.