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Khatija Haque - Head of MENA Research
Published Date: 03 October 2018
The headline UAE PMI stood at 55.3 in September, the third month in a row with a reading at the 55-handle. This signals a steady expansion in the non-oil private sector in Q3 2018. Year to date, the PMI averaged 55.7, similar to the same period last year. Although output and new work rose sharply in September, supported by growth in export orders to the MENA region, employment remained below the neutral 50-level for the second consecutive month. The majority of firms reported no change in staffing in September but nearly 2% of firms indicated a decline in jobs last month. Staff costs (a proxy for wages) were also largely unchanged last month.
Stocks of pre-production inventories were slightly higher in September after declining in August. Over the last four months, inventory levels have been unchanged on average, suggesting that firms are either much better at managing their stocks or they are reluctant to build up inventory; ie indicating softer expected demand in the coming months. The business optimism component of the survey showed that most firms surveyed (62%) expect output to be higher in a year’s time, fewer than in the August survey.
Input costs were slightly higher in September (51.2), but the rate of producer inflation has slowed markedly since January when VAT pushed the index up to 57.4. Selling prices were unchanged in September (50.2) after declining on average for the previous four months.
Backlogs of work rose again in September – unsurprising given strong output and new work growth with no increase in employment – but at the slowest pace since May.
The PMI survey data so far this year suggests to us that the non-oil sector in the UAE is growing at a similar pace to last year, when official statistics showed non-oil GDP growth of 2.5%. Oil production has increased since June and this is likely to support faster non-oil growth in Q4, in our view. However, the additional AED 50bn fiscal stimulus announced by Abu Dhabi in early June is now only likely to be disbursed from 2019, over the next three years.
Source: IHS Markit, Emirates NBD Research
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