UAE: PMI loses ground in July on weaker new business growth and sluggish employment
The Emirates NBD Purchasing Managers’ Index (PMI) fell to 55.8 in July from 57.1 in June. Nonetheless, the index remained firmly above the 50-threshold that separates expansion from contraction in the non-oil producing private sector.
The softer print in July came on the back of moderating output growth as well as softer growth in new orders. New export orders, on the other hand, grew at the fastest clip in three years on the back of stronger demand from Europe and other Gulf Cooperation Council (GCC) countries. Meanwhile, employment and wages were largely unchanged in July. Due to increasing new orders combined with subdued employment, backlogs of work continued to rise sharply in July, albeit at a weaker pace than in June.
On the price front, input cost inflation was modest in July. Output prices, however, continued to decrease for the third consecutive month. Tighter profit margins were likely a key factor in the weaker job creation seen in recent months. Meanwhile, purchasing activity gained traction in July, while inventory levels were broadly unchanged from June.
Although it was slightly below May and June’s record high levels, business confidence remained buoyant in July, supported by sustained momentum in production and new business.
Regarding the outlook for UAE’s non-oil sector, Khatija Haque, head of MENA research at Emirates NBD commented:
“We are cautiously optimistic that recently announced fiscal stimulus and higher oil prices should boost non-oil growth through the rest of the year. In addition, the UAE has increased oil production in recent months and if this is sustained through the rest of the year, would offset weaker than anticipated non-oil sector growth.”