UAE: PMI plummets to an eight-year low in August


UAE: PMI plummets to an eight-year low in August

The IHS Markit Purchasing Managers’ Index (PMI) plunged to 51.6 in August from 55.1 in July. However, the index remained above the 50-threshold that separates expansion from contraction in the non-oil producing private sector.

August’s decline was mainly due to weak export orders and the softest expansion in output in over six years. Meanwhile, input purchases were bland in August, and led to only a marginal reduction in inventory purchases. Moreover, employment levels were relatively unchanged in August, as weak demand hampered hiring activity. On the price front, input prices were virtually stable in August, while output prices continued to tick down driven by increased competition. On a brighter note, firms remained relatively optimistic over the next year, citing an expected demand boost from Expo 2020 and an overall improvement in market conditions.

Going forward, the non-oil private sector will likely pick up some pace, after posting the strongest quarterly expansion in over four years in the second quarter of this year. Solid fundamentals, a dovish stance taken by major central banks and the highly anticipated Expo 2020 will continue to underpin activity and investment in the non-oil private sector. That said, regional tensions and heightened global economic uncertainty poses a downside risk to the outlook.

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