UAE private sector growth falls to six month low

Private sector growth in the UAE slumped to its lowest in six months,according to the monthly survey by Emirates NBD.

The seasonally adjusted UAE Purchasing Managers’ Index (PMI) dropped to 54.3 in May – down from 56.1 in April and its lowest in six months as expansion in output and new orders slowed.

However, the reading was broadly in line with the long-run average and “signalled a robust rate of expansion of the non-oil private sector”, the report said.

New business inflows rose in May, although the rate of growth eased to a five-month low. According to anecdotal evidence, a general improvement in economic conditions was supplemented by promotional activities.

Meanwhile, there were signs of weakness in client demand in external markets as new export orders rose only marginally.

Business activity also increased in May based on strong demand and new projects.

Employment continued to rise across the non-oil private sector in May as companies hired extra staff in response to greater output requirements.

However, the growth in hiring saw its weakest rate in seven months, the report added.

On the costs side, after seven successive months of inflation, firms faced lower input costs in May. The rate of decline was marginal, however.

Some survey respondents reported higher raw material costs, but this was offset by others citing strong competition among suppliers, the report said.

Faced with intense competition, companies lowered their charges and offered discounts to their own clients for the second consecutive month.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The decline in the headline PMI reading in May comes off very high readings from February through March. The data still shows a solid expansion in output and domestic demand in May, although external demand appears to have softened.”

The report also found that the degree of business confidence climbed to its highest level since September 2016, with more than a fifth of the panel forecasting growth in output.

Market demand and projects are expected to rise, with growth also set to be bolstered by promotional activities, the report added.