UAE PMI: Momentum slows in October

The Emirates NBD Purchasing Managers’ Index (PMI) declined to a six-month low of 53.3 in October, indicating a more modest rate of expansion in the non-oil private sector last month.  The lower headline index masked very strong growth in output last month, with this sub-index at 60.6, only slightly lower than September’s 61.2 reading.  However, this was offset by flat unemployment, shorter suppliers’ delivery times and slower inventory accumulation. 

New orders growth was broadly unchanged from September at 53.2.  This is markedly slower than the readings of 57.5 and 57.0 in July and August, and suggests that demand has moderated.  In particular, new export orders declined for the fourth straight month in October. 

Input prices picked up in October after softening slightly in September.  Both purchase costs and staff costs rose last month, with purchase costs rising at a slightly faster rate. Overall input price inflation remains relatively modest however.  This has allowed firms to continue to cut output prices in what remains a competitive environment. Output prices in the UAE PMI survey have now declined for 12 consecutive months.   

With output rising strongly, and employment relatively stagnant, backlogs of work increased modestly in October, but at a slower rate than September.  Purchasing activity also slowed from the 13-month high recorded in September.  Inventories  increased at a slower rate last month, in line with softer new orders growth. 

The October PMI reading suggests that growth momentum in the UAE’s non-oil private sector slowed at the start of Q4 following a relatively strong Q3.  Year-to-date, the PMI averaged 53.8, well below the average of 56.0 in 2015.  Consequently, we remain comfortable with our real GDP growth forecasts of 3.0% for the UAE this year, down from 3.8% in 2015.  

Emirates NBD UAE Purchasing Managers' Index

Source: IHSMarkit, Emirates NBD Research