Dubai: In June, the non-oil private sector firms in the UAE reported the weakest improvement in business conditions since August 2013, according to the Purchasing Manager’s Index (PMI) for the month.

The UAE PMI is based on a comprehensive survey of non-oil private sector executives, sponsored by Emirates NBD and produced by Markit measures the business conditions.

Slowdowns in growth of output and new business were at the forefront of the overall deceleration, while employment continued to rise at a solid pace. Meanwhile, inflationary pressures from both input costs and output charges were negligible.

“Although the June PMI data was the softest in two years, it signals solid growth in the non-oil private sector. Furthermore, it is difficult to determine whether the softening will continue into the third quarter, particularly when bearing in mind the Islamic calendar. We attribute some of the slowdown in the June data to the start of Ramadan, and we would expect to get a clearer picture of underlying growth momentum later in the year,” said Khatija Haque, Head of MENA Research at Emirates NBD.

The headline Emirates NBD UAE PMI for June dropped to a 22-month low of 54.7. Down from 56.4 in May, the latest reading contributed to the weakest quarter of growth since the third quarter of 2013 (56.0). However, the report notes that the rate of improvement remained faster than the series average and solid overall.

Latest data indicated that the overall slowdown was mirrored by weaker expansions in output and new orders during June. Activity growth eased to a 20-month low, while new work inflows rose at the slowest pace since April 2012. However, the respective rates of increase remained marked overall. According to panellists, improved marketing strategies, new client wins and new product launches all helped to boost demand conditions, which in turn led to another expansion in output.

A weaker rise in new export work contributed to slower growth of total new business in June. The latest increase was the weakest since the end of 2013, but remained broadly in line with the average recorded over nearly six years of data collection.

Slower growth was evident across most of the components in the PMI, with only output prices and stocks of purchases rising at slightly faster pace than May. The output and new export orders indices fell by more than five points, but remain well above the neutral 50-level at 57.5 and 55.1 respectively. Notably, 23 per cent of panellists reported higher output in June, citing ‘solid demand conditions’ underpinning the growth, while just 11.5 per cent of panellists reported lower output relative to the previous month.

Similarly, UAE non-oil private sector firms raised their input buying more slowly in the latest period. Although solid overall, the rate of expansion was the least marked in nearly two years. Subsequently, pre-production inventories rose only modestly.

Meanwhile, the rate of job creation was little-changed from the solid pace seen in the previous two months during June. Those companies that hired additional staff commented on the opening of new branches and efforts to expand operating capacity.

Total input costs faced by UAE non-oil private sector businesses increased for the third straight month in June, albeit only fractionally. The rate of inflation was muted relative to the long-run trend, helped by slower rises in both purchase prices and staff costs in the latest period.