Dubai: The latest Purchasing Manager’s Index (PMI) of the UAE showed weaker but still strong growth at UAE’s non-oil private sector companies in February.
The UAE’s PMI is a composite indicator of non-oil economy based on data compiled by HSBC and Markit Economics from purchasing executives in approximately 400 private sector companies in the UAE.
The headline PMI for February dropped to a five-month low of 58.1 compared to the highest reading since last October at the start of 2015 at 59.3.
Despite the mild slowdown since January, the rate of non-oil expansion remained sharp in the context of historical data.
“Activity in the UAE’s non-oil private sector continued to rise strongly in February, helped by robust growth of new business. That said, the rates of expansion slowed since January. Nonetheless, the outlook for the UAE remains bright, with employment rising at a faster pace and cost pressures easing as a result of lower fuel prices,” said Philip Leake, Economist at Markit.
The overall slowdown was driven by milder expansions in output, new orders and new export business. Purchasing activity also rose at a slower pace during the month, contrasting with a faster rate of job creation.
Meanwhile, downwards pressure from lower fuel prices manifested itself in February’s survey data, with the rate of purchase price inflation easing to a four-and-a-half year low.
Anecdotal evidence of improving demand was reflected in February’s survey data, as new orders continued to rise at a steep rate. That said, despite remaining comfortably in growth territory, the respective index weakened to an 18-month low. Foreign orders also increased more slowly, with the latest expansion the least marked since last October.
Higher new work intakes and subsequent production requirements led to a further rise in purchasing activity in February. The pace of expansion was strong overall, but weaker than seen in the previous month. Stocks of purchases continued to rise solidly as a result.
Employment in the UAE’s non-oil private sector increased for the thirty-eighth successive month in February, supported by ongoing growth of output and new business. The rate of hiring picked up to a four-month high.
A by-product of stronger order books was higher backlogs of work. The latest rise in work outstanding was solid overall and the tenth in as many months, thereby marking the longest sequence of backlog accumulation since the survey began in August 2009.
“The latest data continue to suggest that there is little excess capacity in the UAE economy. The backlogs of work grew at a faster pace last month, even as order growth slowed. Firms also increased employment at the fastest rate since October 2014. Purchasing activity remains strong, but was marginally slower in February relative to the previous month,” said Khatija Haque, Head of MENA Research at Emirates NBD.
Total input costs faced by firms operating in the UAE’s non-oil private sector rose at the slowest pace in three months in February. Data suggested that the overall easing was mainly driven by the weakest increase in purchase prices since August 2010. Staff costs also continued to rise at a moderate pace. Muted cost pressures, alongside increased competition, led to the first reduction in selling prices in five months.
