|
Today sees the release of February data from the Emirates NBD Purchasing Managers’ Index® (PMI®) for the UAE. The survey, compiled by IHS Markit, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.
Commenting on the UAE PMI® survey, Khatija Haque, Head of MENA Research at Emirates NBD, said:
“The Emirates NBD Purchasing Managers’ Index (PMI) for the UAE fell to 53.4 in February from 56.3 in January, and was the lowest reading since October 2016. The drop in the headline index reflects slower growth in new orders last month (new export orders rose at the slowest rate in 11 months), as well as the steepest decline in private sector employment in the survey history.
The employment index fell to 47.5 in February, as nearly 9% of businesses surveyed reported lower headcount relative to January, while just 1.5% reported increased hiring. Some firms reported operating with the minimum level of staffing in a bid to keep costs down. Staff costs were broadly unchanged last month, again reflecting a relatively soft job market.
The pricing environment remains challenging for private sector businesses, and stiff competition led more than 13% of firms on the panel to offer discounts in order to secure new work. Selling prices in February fell at the fastest rate in the survey history on a seasonally adjusted basis (ie after taking into account the usual promotions offered during February). However, input cost inflation was only marginal in February.
Backlogs of work outstanding increased at the fastest rate since June last year. This partly reflects lower employment, but some firms have also reported that delays in receiving payments from customers have led to delays in completing projects, which would then be reflected in higher backlogs of work outstanding.
The quantity of purchases increased sharply in February, in line with output growth, but inventories rose only slightly following two months of declines. While some firms reported holding stock in anticipation of future order growth, the majority are instead storing only what is required to fulfil their current requirements.
Businesses were also less optimistic about their future output than in January. Around half of firms surveyed expected their output to be higher in a year’s time, compared with nearly 70% in January.”
The main findings of the February survey were as follows:
Sharpest reduction in employment in survey’s history
New order growth at 28-month low
Marked fall in charges amid fragile demand
The headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index™ (PMI®) – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – dropped to a 28-month low of 53.4 in February from 56.3 in January. The reading signalled an improvement in business conditions, but one that was weaker than the series average.
Anecdotal evidence suggested that the slowdown reflected challenging market conditions and competitive pressures. These factors led new orders to rise to the least extent since October 2016. The rate of output growth also eased in February, and was softer than seen on average in 2018.
Companies responded to signs of weaker new order inflows by reducing staffing levels. Moreover, the rate of job shedding was the most marked in the survey’s history. A number of panellists signalled that they were maintaining only minimum workforce numbers, partly due to cost saving efforts.
Efforts to limit increases in operating expenses were generally successful as both purchase prices and staff costs rose only marginally. This allowed companies some leeway to reduce their selling prices, which they did to the greatest extent in nine-and-a-half years of data collection. Respondents indicated that strong competition amid difficult market conditions led them to offer discounts.
Despite a sharp slowdown in new order growth, backlogs of work increased at a marked and accelerated pace in February. A number of panellists reported that difficulties in obtaining payments from customers led to delays in the completion of projects. Issues in supply chains were also evident as vendor delivery times improved to the least extent in the survey’s history.
The rate of expansion in purchasing activity quickened, helping lead to a first rise in inventories in three months. Stocks of purchases increased only slightly, however.
February data pointed to a sharp drop in sentiment regarding the 12-month outlook among UAE non-oil companies, linked to the current challenging market environment. Firms remained optimistic, however, that economic conditions will improve and help support further expansions in business activity.
|
New
