Dubai: The UAE’s Purchasing Managers’ Index (PMI) rose to a six-month high of 57.1 in August, up from 55.8 in July.
PMI data for August showed business conditions improved at the strongest rate in six months, driven by sharper expansions in output and new orders. Marked growth of new work resulted in greater pressure on operating capacity.
The UAE PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in approximately 400 private sector companies. The survey, sponsored by Emirates NBD and produced by Markit, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.
“The sharp rise in the UAE PMI in August confirms our view that Ramadan likely contributed to the softer readings in June and July. Encouragingly, new orders and output growth readings remain high, suggesting strong domestic demand. Slower growth in export orders last month may reflect the impact of currency appreciation relative to other emerging markets,” said Khatija Haque, Head of MENA Research at Emirates NBD.
The stronger improvement in business conditions in August was underpinned by faster growth of new orders (61.3) as well as output (63.1), suggesting that domestic demand has picked up. Growth in output was the fastest since February 2015, and was attributed to “promotional activities and a general improvement in market conditions”, according to respondents.
The backlogs of work index rose to 55.9 in August, the highest reading since the series began in 2009, on the back of strong order growth and the start-up of new projects, according to the survey.
Export order growth slowed in August to 54.4, the lowest reading in two years. Slowing growth in key export markets and a stronger exchange rate may be weighing on external demand. However, export order growth was still significant, with the index reading well above the neutral 50-level.
Purchasing activity increased at a much faster pace in August, as firms responded to stronger order growth. Stocks of purchases also rose more quickly last month, relative to June and July. The employment index was largely unchanged at 52.3, signalling the forty-fourth consecutive month of jobs growth in the UAE’s non-oil private sector.
Input prices rose at a slightly faster pace in August, while output prices declined for the second consecutive month. Margins remain under pressure and pipeline pressures for the CPI appear low; the output price index has been below the neutral 50-level for six of the last seven months.
“The August PMI data suggests that, at this stage, the sharp decline in oil prices is having little impact on the pace of non-oil sector growth in the UAE. As with Saudi Arabia however, we recognise that sustained high oil production is likely supporting activity in related manufacturing sectors in the UAE. We await the Dubai Economic Tracker data for more information on business conditions in the services sectors,” said Haque.
