Business confidence in UAE’s non-oil sector drops to six-month low

Business conditions in the UAE’s non-oil private sector slowed to the lowest level since September last year in February, according to the latest economy survey by Emirates NBD.

Weaker growth also weighed on business confidence, which registered at a six-month low after falling sharply since the start of 2018.

The seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI) eased to 55.1 during February, from 56.8 in January.

The sector’s slowdown came on the back of reduced output growth and softer job creation.

Output growth fell to a nine-month low during February. The rate of expansion remained sharp overall, however, and was broadly in line with the series’ historical average. Some firms noted that strong demand led to higher output requirements.

While job creation continued in the market, extending the current sequence of employment growth to 22 months, the rate of growth dropped to its slowest since June 2017. It was also “subdued in the context of historical data”, the report stated.

However, demand conditions remained strong during February and non-oil private sector firms recorded an uptick in new business last month. The rate of growth accelerated since January and was sharp overall, with expansion slightly above the average seen over course of 2017.

Along with the improvement in domestic demand, new orders from abroad continued to rise for the third month running. But the rate of growth was only slight overall.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The February PMI survey shows a solid rate of growth in the UAE’s non-oil private sector, although it was slower than we’ve seen in recent months.

“The key components of the survey point to strong domestic demand but firms were notably more cautious than they were in January about the prospects for output growth over the coming 12 months.”

In terms of cost pressures, input price inflation eased since the preceding survey, falling below the long-run average. Meanwhile, output charges declined in February’s survey.

“According to anecdotal evidence, the reduction in cost pressures allowed firms to reduce prices to stimulate client demand,” the report stated.

In line with dull market conditions, business confidence among non-oil private sector firms in the UAE also deteriorated sharply since January. The overall level of optimism was also well below the historical average, the report added.