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Thu 7 Jan 2016 01:51 PM

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UAE private sector growth slows to 40-month low in December

New report shows muted growth of new work is key factor weighing on performance of non-oil sector

UAE private sector growth slows to 40-month low in December

The UAE’s non-oil private sector ended 2015 on a low note, with business conditions improving at the slowest rate in 40 months, according to a new report.

Data from the Emirates NBD UAE Purchasing Managers’ Index survey showed that a key factor weighing on the sector as a whole was relatively muted growth of new work – the pace of expansion was the weakest since August 2011.  

The survey, sponsored by Emirates NBD and produced by Markit, also revealed that output, employment and input buying rose more slowly, while charges decreased as firms competed to secure new clients.

After adjusting for seasonality, the headline Emirates NBD UAE PMI pointed to a loss of growth momentum in December. Falling from 54.5 in November to 53.3, the latest reading was the lowest since August 2012.

Despite still signalling a solid improvement in business conditions, it meant that the fourth quarter was the weakest on average (53.9) since Q3 2012.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The PMI data point to weaker domestic and external demand in Q4 2015 which is reflected in lower readings for new orders, employment, output and the backlogs of work.

"Indeed for 2015 as a whole, the average PMI was lower than for 2014, signalling slower – but positive – growth in the non-oil private sector. 

"However, softer non-oil growth in the UAE last year is likely to have been partially offset by robust oil sector expansion, and we remain comfortable with our estimate of 4 percent real GDP growth in 2015 down from 4.6 percent in 2014.” 

Underpinning the overall slowdown was a subdued expansion in new orders placed with UAE non-oil private sector companies. The latest rise was the least marked in nearly four-and-a-half years, albeit robust overall.

New business from abroad followed a similar trend, with growth softening but remaining solid. Some panellists linked higher new work to improving market conditions both domestically and abroad, while others made reference to gains generated from marketing efforts.

The survey said growth of new work was sufficient to motivate firms to raise their output further in December. The rate of expansion moderated in line with the headline index, although it remained slightly faster than the long-run average.

Another factor behind the overall easing was slower job creation at the end of 2015. Employment rose only modestly, as signalled by the respective index dropping below the 2015 average.

On the price front, cost pressures remained modest in December.  Both salaries and purchasing costs rose more slowly, thereby restricting the overall rate of input price inflation, the survey showed.

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