UAE’s non-oil sector sees slowest growth in new orders since 2010

Growth in the UAE’s non-oil private sector eased in September, with business conditions improving at the weakest pace since June, according to the monthly PMI index released by Emirates NBD.

The sector’s slowdown was primarily led by slackening growth in new orders – the least in over six years, since June 2010.

There were some reports of weaker market conditions, although these were outweighed by mentions of improving demand, the report said.

The survey highlighted new export work as an area of concern. The amount of new business from abroad fell for the third straight month, and at a survey-record pace.

Overall, the seasonally adjusted index touched 54.1 last month, down from 54.7 in August but remaining above the 50 mark, indicating an improvement in business conditions.

It was also broadly in line with the average so far this year (53.8), although lower than 2014 (58.1) and 2015 (56).

Higher output remained a key driver of growth of the sector as a whole during September. The rate of expansion was only slightly slower than seen in the previous two months, the report said.

Activity was reportedly bolstered by new projects and new client wins.

Purchasing activity also rose more quickly in September with higher input buying catering for both new and ongoing projects. Stocks of purchases also increased sharply with the rate of inventory building at a record high.

However, the report also found that hiring remained slow at the end of the third quarter, continuing the trend seen throughout much of 2016.

“A lack of meaningful workforce growth was partly behind another rise in work outstanding. The rate of accumulation accelerated, with some firms blaming the time-consuming nature of ongoing projects,” the report said.

Meanwhile, total input costs decreased for the first time in 18 months – indicating the third decline in purchase prices since August 2009.

Charges also dropped, extending the current downward sequence to 11 months.

Anecdotal evidence highlighted competitive pressures leading to the falls, as both companies and suppliers sought to attract new business, the report stated.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The sharp slowdown in new order growth last month appears to be due to weaker demand from external markets rather than soft domestic demand.

“Growth in output and purchasing activity remained strong. Overall, the PMI data points to a faster rate of expansion in the UAE’s non-oil private sector in Q3 2016, compared to Q2.”