UAE private sector growth slows to 3-month low in September

Survey says slowdown largely reflective of a subdued expansion in new work which fell to 6-year low
UAE private sector growth slows to 3-month low in September
By Staff writer
Sat 08 Oct 2016 12:38 AM

Growth in the UAE’s non-oil private sector eased in September, with business conditions improving at the weakest pace since June, according to a new survey.

Data from the Emirates NBD UAE Purchasing Managers’ Index (PMI) showed that the sector’s slowdown was largely reflective of a subdued expansion in new work – the latest rise was the least marked in over six years.

Job creation was also modest but both output and purchasing rose sharply, suggesting that firms remain confident about the near-term outlook.

On the price front, competitive pressures led to lower purchase costs and output charges. The fall in the former ended a 17-month period of inflation, the survey showed. 

The headline seasonally adjusted Emirates NBD UAE PMI slipped closer to the 50.0 no-change mark for the second month running in September. Down from 54.7 in August, the latest reading of 54.1 was still consistent with a solid improvement in business conditions.

It was also broadly in line with the average so far this year (53.8), albeit noticeably lower than 2014 (58.1) and 2015 (56.0) trends.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The sharp slowdown in new order growth last month appears to be due to weaker demand from external markets rather than soft domestic demand.  Growth in output and purchasing activity remained strong. Overall, the PMI data points to a faster rate of expansion in the UAE’s non-oil private sector in Q3 2016, compared to Q2.” 

Higher output remained a key driver of growth of the sector as a whole during September. The rate of expansion was marked and only slightly slower than seen in the previous two months. Activity was reportedly bolstered by new projects and new client wins.

Whereas output continued to rise sharply, growth of new business eased substantially to the slowest rate since June 2010. There were some reports of weaker market conditions, although these were outweighed by mentions of improving demand, the survey showed.

Data highlighted new export work as an area of concern. The amount of new business from abroad fell for the third straight month, and at a survey-record pace.

Despite the slowdown in growth of total new work, purchasing activity rose more quickly in September, according to the survey. Panellists indicated that higher input buying was to cater for both new and ongoing projects.

Hiring was comparatively modest at the end of the third quarter, continuing the trend seen throughout much of 2016 to date.

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