United Arab Emirates: PMI inches up marginally in September
October 3, 2018
The Emirates NBD Purchasing Managers’ Index (PMI) rose slightly to 55.3 in September, up from 55.0 in August. The index thus remained firmly above the 50-threshold that separates expansion from contraction in the non-oil producing private sector. Furthermore, all three of the monthly PMI readings in Q3 hovered around the 55-mark, signaling growth in the non-oil sector was steady over the quarter.
Output continued to rise at a strong pace in September, though it moderated somewhat, while new order growth shot up, supported notably by solid export orders from the MENA area. However, the employment index remained below the 50-point threshold, where it fell to for the first time in the survey’s near ten-year history in August. Consequently, backlogs of work continued to increase, although at the softest level since May.
Purchasing activity ramped up slightly in the month, while stocks of purchases rebounded slightly after falling for the first time in six years in August. On the price front, input cost inflation remained mild in September, but output prices were steady for the first time since April, a welcome sign given the ongoing pressures affecting firms’ margins since the introduction of VAT in January.
Commenting on September’s results, Khatija Haque, head of MENA research at Emirates NBD, noted:
“Over the last four months, inventory levels have been unchanged on average, suggesting that firms are either much better at managing their stocks or they are reluctant to build up inventory; i.e. indicating softer expected demand in the coming months. […] The PMI survey data so far this year suggests to us that the non-oil sector in the UAE is growing at a similar pace to last year, when official statistics showed non-oil GDP growth of 2.5%. Oil production has increased since June and this is likely to support faster non-oil growth in Q4, in our view”.
Author: Joffrey Simonet, Economist