Dubai: The UAE’s non-oil private sector continued to report strong output growth in November, with the Purchasing Managers’ Index (PMI) rising to 55.8 in November from 55 in October.
The average PMI with just one month left of the year is 55.7, marginally lower than the 55.9 recorded in the same period last year, signalling growth in the non-oil private sector at a similar rate to 2017.
Official data showed the UAE’s non-oil sector grew 2.5 per cent in 2017. The Quarterly Economic Review of the Central Bank of UAE for the third quarter of 2018 projected the non-oil GDP in excess of 3 per cent for the whole year, while in the second and third quarter of the year the private sector grew at the rate of 3.3- and 3.2 per cent, respectively.
PMI data for November showed domestic demand and new orders were supported by price discounting.
“Selling prices in the UAE fell at the fastest rate since the 2009 recession in November, with the output price index declining to 47 from 48.7 in October,” said Khatija Haque, head of MENA Research at Emirates NBD. “Input costs rose at the fastest rate since January even as firms were cutting output prices indicating the challenging business environment and the pressure this is putting on firms to compete on price.”
Data suggests that price discounting helped firms to secure new work during November. Decline in in output prices was recorded in spite of a pick up in the rate of cost inflation. Overall input prices rose to the greatest extent since the introduction of VAT in January.
The rise in overall input costs was driven by higher purchase prices, which respondents linked in turn to increased raw material costs and higher prices charged by wholesalers.
Despite sustained growth in output, private sector job creation continued to remain sluggish, with the employment index rose marginally to 50.6 in November from 50.1 in October. But the majority of firms (94.2 per cent) reported unchanged headcount last month. The 3.1 per cent of firms who reported increased hiring attributed this to higher workloads.
“Steep price discounting combined with other marketing efforts helped support domestic demand, and both output and new work rose at a faster rate last month, compared with October,” said Haque. “Firmer export demand also contributed to overall new orders growth in November, with new export orders rising at the fastest pace in four months. Some businesses reported increased orders from other GCC countries in particular.”
Staff costs were only marginally higher in November, with just 1.4 per cent of respondents saying they had increased wages and salaries.
Purchasing activity among private sector firms increased sharply in November, as firms responded to increased new orders and output requirements. However, the overall level of inventories was unchanged, suggesting that firms are unwilling to invest in pre-production goods until they are actually required.
Optimism about future output remained near the series high, although this index declined modestly from October. 75 per cent of firms surveyed expected their output to be higher in a year’s time, compared with 6.7 per cent who predicted lower output.