UAE’s non-oil private sector recorded a 10-month high growth in July
Despite a poor global market environment, the UAE’s non-oil private sector recorded a 10-month high growth in July, according to Emirates NBD Purchasing Managers’ Index (PMI) released on Wednesday.
The seasonally adjusted PMI, which covers manufacturing and services, rose to 55.3 last month from 53.4 in June.
Sharp expansions of output and new work helped the sector to gather momentum, alongside quicker rises in purchasing activity and employment.
Emirates NBD senior economist Jean-Paul Pigat commented: “July’s survey suggests that the UAE’s non-oil private sector economy started off the second half of 2016 on a strong footing. It is encouraging that despite relatively weak exports, economic momentum is being supported by stronger domestic demand conditions.”
The rate of job creation was the fastest in over a year. Meanwhile, purchasing costs continued to increase solidly. The rate of inflation remained relatively subdued, however, and was insufficient to prevent another fall in charges. Competitive pressures outweighed higher costs when companies came to set their selling prices.
Data signalled that growth of total new business was largely centred on the domestic market. New export orders fell for the first time in three months, and at a survey-record pace. There were reports of fragile economic conditions across international markets.
Purchasing activity was reflective of rising business requirements in July. The latest increase was the fastest in four months, with firms commenting on the start-up of new projects. The rate of inventory building also picked up. Some respondents suggested that stocks had been accumulated in anticipation of future sales.
Job creation was another by-product of new order growth in July. The pace of hiring quickened to a 14-month high, contrasting with the trend seen over the second quarter – when employment was either stagnant or barely rising.
A larger workforce failed to alleviate pressure on operating capacity, however. Backlogs of work rose for the seventh successive month, albeit only modestly.
On the price front, the rate of overall cost inflation was little-changed since June at the start of the third quarter. The increase was solid overall, mainly driven by higher purchase prices. That said, it was slightly weaker than the series average, and charges continued to fall regardless. Some panellists offered discounts in the face of greater competition, while others did so in an effort to attract new clients.
The seasonally adjusted Emirates NBD Saudi Arabia PMI climbed to an eight-month high of 56.0 last month from 54.4 in June. This suggests the economy might be stabilising after a slowdown due to low oil prices and state spending cuts.
Output growth rose sharply, while growth in new orders and employment growth also accelerated. Investors may turn more positive towards domestic-demand driven companies as a result, especially those that continue to pay dividends.
The Emirates NBD Egypt PMI for the non-oil private sector was 48.9 in July, an improvement from June’s 47.5, but it was the tenth straight month of contraction.
Markit, which compiled the data, said foreign exchange liquidity shortages, higher costs and subdued customer turnout were the main burdens on the economy, but there was a slight improvement in underlying demand.