United Arab Emirates: PMI inches down to ten-month low in March
April 3, 2018
The Emirates NDB Purchasing Managers’ Index (PMI) fell marginally from 55.1 in February to 54.8 in March. The result marked the lowest reading since May 2017. However, the index remained firmly above the 50-threshold that separates expansion from contraction in the non-oil producing private sector. The downward trend observed since the start of the year partly reflects the front-loading of activity that happened before the introduction of the 5% VAT in January, which necessarily caused a slowdown in the following months.
A slowdown in output growth to a near two-year low was largely responsible for the fall in the index in March. New order growth also moderated, as new export orders declined from the previous month for the first time since November, and employment growth was also softer than in the previous month. Nevertheless, firms were more optimistic about future levels of output, signaling that they believe this relative slump is temporary.
Indeed, according to Daniel Richards, MENA Economist at Emirates NBD:
“We retain a positive outlook for the year ahead. Higher oil revenues will bolster government revenues, which will support an expansionary budget with greater spending on infrastructure projects and public sector wages.”
On the price front, firms continued to squeeze their margins to keep demand afloat: Input prices rose marginally, while output prices declined. Inventory and purchasing activity growth continued to decelerate in tandem, reflecting the still consequent amount of stocks built up at the end of 2017.
Author: Joffrey Simonet, Economist