UAE PMI: Faster expansion in January

The Emirates NBD Purchasing Managers’ Index (PMI) for the UAE rebounded to 56.3 at the start of 2019, after a disappointing December reading of 54.0.  The January PMI was the highest reading in seven months, and signalled a good start to the year for the non-oil private sector. 

The main driver for the higher headline index in January was faster output growth, and the new orders index rose as well.  The improvement in business activity was partly due to promotions and price discounting by firms. The output price index remained below the neutral 50-level in January, signalling another month of lower average selling prices in the UAE, although the extent of price discounting in January was slight.  Selling prices have declined for eight of the last nine months.  Input costs rose only modestly in January. 

Fewer than 3% of firms reported increased hiring in January, despite the rebound in output and new order volumes.  Some firms indicated that efforts to cut costs prevented them hiring. Staff costs were also only marginally higher in January. 

Purchasing activity was robust in January, as firms responded to stronger order growth and increased output.  However, the stock of pre-production inventories declined for the second month in a row, suggesting that firms are managing their inventories more efficiently, and not building up stocks in anticipation of future demand. 

Business optimism about future output remained high in January, with more than 68% of firms expecting their output to be higher in a year’s time. None of the firms surveyed expected output to be lower in a year’s time.   

UAE PMI recovers from December 2018 low

Source: IHS Markit, Emirates NBD Research

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