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Khatija Haque - Head of MENA Research
Published Date: 03 October 2017
The Emirates NBD Purchasing Managers’ Index (PMI) for the UAE declined to 55.1 in September, indicating the slowest rate of expansion in the non-oil private sector since May. Slower output and new orders growth were the main reasons for the lower headline reading, although both output and new orders rose at a sharp rate last month (58.9 and 59.8 respectively). Economic activity appears to be driven largely by domestic demand, as new export orders declined marginally in September.
Employment rose in September but at a slightly slower rate than in August. Input cost inflation eased to a four month low in September, on the back of more modest increases in purchasing costs. Staff costs were unchanged month-on-month. Firms reduced selling prices on average last month to remain competitive, although the decline was relatively modest with the index at 49.4.
Encouragingly, inventories and purchasing activity rose sharply in September, with some survey respondents noting that they were stockpiling pre-production inventories in anticipation of stronger demand in the coming weeks. The business optimism index also rose to 57.9 in September from 56.2 in August, although it remains below the series average.
Despite the lower heading index reading in September, the average PMI for the third quarter was 56.1, the highest quarterly average since Q3 2015. Overall, the PMI survey data in Q3 2017 points to the fastest rate of expansion in the non-oil economy in two years. This is in line with our expectation of faster non-oil GDP growth in 2017 relative to last year, even as oil output (and oil-related GDP) is forecast to decline this year. The UAE’s fiscal and external deficits are small relative to the rest of the GCC and continued investment in infrastructure is expected to underpin non-oil GDP growth through 2020.
Source: IHS Markit, Emirates NBD Research
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