UAE: PMI rises in March on export demand recovery
The Emirates NBD Purchasing Managers’ Index (PMI) rose from 53.4 in February to 55.7 in March. Consequently, the index remained above the 50-point threshold that separates expansion from contraction in the non-oil producing private sector.
The improvement in business conditions in March was relatively broad-based, with several indicators suggesting cautious optimism for the outlook in the months ahead. Notably, output growth reached a seven-month high, while growth in new orders also accelerated, thanks largely to a solid recovery in export demand—which had been muted in the previous three months.
The steep price discounting observed in past months—February saw the largest decline in selling prices in the PMI’s 10-year history—likely supported the rebound in external demand, and firms continued to lower their prices in March, albeit at a more modest rate. In another positive development, employment levels marginally rebounded after a sharp dip in February, though the labor market outlook remains constrained by ongoing price competition and efforts to keep costs down to protect margins.
Meanwhile, backlogs of work increased at an average pace in March despite higher output. Purchasing activity meanwhile soared, while stocks of inventories increased at the fastest rate in a year, suggesting that firms are expecting higher demand in coming months. This was confirmed by the future output index, which reached an all-time high in March as over three quarters of firms were expecting output to rise in the year ahead.
Commenting on the reading, Khatija Haque, head of MENA research at Emirates NBD, noted: “While the March reading is encouraging, the data over the last three months does not yet point to a rebound in non-oil GDP growth in the UAE. However, we do expect faster growth in the non-oil sectors this year relative to 2018 […] as construction and infrastructure projects are completed ahead of Expo 2020 and increased government spending announced last year kicks in”.