Slowest pace of expansion since October 2016
December data from the Emirates NBD Purchasing Managers’ Index® (PMI®) for the UAE sees non-oil sector expansion slow down in December 2018.
The survey, compiled by IHS Markit, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.
Commenting on the UAE PMI® survey, Daniel Richards, MENA Economist at Emirates NBD, said: “The Emirates NBD Purchasing Managers’ Index (PMI) for the UAE dipped from 55.8 in November to 54.0 in December.
“This marked the slowest pace of expansion in the non-oil private sector since October 2016, and has weighed on the 2018 average, which finished the year at 55.5, from 56.1 in 2017.
“Output prices did not fall as quickly in December as in the previous month – which was the fastest pace recorded since the 2009 recession – but they remained sub-50.
“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.”
The fall in output prices was mitigated somewhat by a slower pace of growth in purchase costs which expanded at the slowest pace since August.
Nevertheless, the 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% of firms took on new staff while all respondents reported their staffing costs unchanged, maintaining a trend recorded throughout H2 2018.
Despite the squeeze on firms and dip in the headline reading, a sizeable majority of respondents (65.4%) retain the view that output will be higher in 12 months’ time, while only 5.2% expected 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 generally remained optimistic that business activity will continue to increase over the course of 2019.
Optimism was based on expectations of improving economic conditions and success in securing additional sales over the next 12 months.
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