United Arab Emirates: PMI falls to over two-year low in December on softer external demand
January 10, 2019
The Emirates NBD Purchasing Managers’ Index (PMI) fell from 55.8 in November to 54.0 in December, its lowest level since October 2016. Nevertheless, the index remained above the 50-point threshold that separates expansion from contraction in the non-oil producing private sector.
The fall observed in the index in December came mainly on the back of softer output and new order growth, with the new export order index weakening quite sharply, indicating that new demand was largely driven by the domestic economy in the month. Employment levels and staff costs were largely stable in the period after registering modest gains in November. Purchasing activity growth also moderated in December, reflecting softer demand, and firms tapped into their input inventories in the month.
Meanwhile, output prices continued to fall due to domestic competition and sales promotion, though at a much softer pace than the 9-year low registered in the previous month. Khatija Haque, head of MENA research at EmiratesNBD, furthermore noted that ”some firms cited expectations of successful sales drives to help boost output, suggesting that price discounting will remain necessary to boost output in 2019”. On the input side, inflation moderated significantly from the near one-year high reached in November.
Finally, business confidence regarding output in the year ahead fell in December but remained elevated, with just under two thirds of survey respondents being optimistic.
Author: Joffrey Simonet, Economist