Dubai – Mubasher: The UAE’s non-oil private sector activity contracted to a five-month low in August, pressured by a record decline in average employment for the first time since the survey began in August 2009, according to a recent survey sponsored by Emirates NBD and produced by IHS Markit.
The headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI), which is an indicator of the operating conditions in the non-oil private sector economy, levelled down to 55.0 in August versus 55.8 in July, with a reading above 50 indicates expansion.
“The softness in employment, which has been evident to some extent since 2016 but appears to have slowed even further this year, is surprising in the context of strong reported growth in output and new orders in the private sector over the same period,” Khatija Haque, head of MENA Research at Emirates NBD, said.
Output growth advanced to 63.1 in August from 61.9 a month earlier, meanwhile growth of new orders narrowed to a 20-month low of 57.1 from 60.6.
Inflows of new business advanced at a slower pace in August. The rate of improvement was the lowest recorded since December 2016, the survey found.
Fresh export orders jumped once again during August, extending the sequence seen since April, and reflecting robust inflows of new business from neighbouring GCC countries.
Costs paid by non-oil private sector companies remained unchanged month-on-month in August for most of firms. Companies also announced price discounting linked to promotional activity.
Optimism among businesses in the GCC nation’s non-oil private sector rose to a record high last month, as many firms linked business confidence to the launching of fresh products, projects surrounding Expo 2020 and marketing drives, according to the survey data.
“The August PMI survey suggests that while activity in the non-oil private sector is expanding at a similar rate to last year, margin pressures on firms mean that this growth in new work and output is not translating to job creation or higher wages,” Haque said.
“As a result, we retain our view that private consumption is unlikely to contribute significantly to gross domestic product growth this year, with government spending and investment, and net exports likely to be the engines of growth,” she added.