UAE private sector activity dips, but optimism remains strong

Dubai - Bright outlook based on expectations of improving economic conditions, success in securing additional sales

Non-oil private sector activity in the UAE slowed in December 2018 due to decline in output and new orders, according to the Emirates NBD Purchasing Managers' Index (PMI).
"The PMI for the UAE dipped from 55.8 in November to 54.0 in December. This marked the slowest pace of expansion in the non-oil private sector since October 2016, and has weighed on the 2018 average, which finished the year at 55.5, from 56.1 in 2017. Output fell from 60.1 to 58.8 and new orders from 61.0 to 58.3," said Daniel Richards, Mena economist at Emirates NBD.
Domestic competition led to sales promotions, according to firms surveyed, and a slower pace of growth in new export orders suggests that most of the growth in new orders was domestically-driven.
Companies generally remained optimistic that business activity will continue to increase over the course of 2019. Optimism was based on expectations of improving economic conditions and success in securing additional sales over the next 12 months.
In terms of recruitment, efforts to control costs discouraged firms from hiring additional workers at the end of 2018, despite increasing new business. "Employment was broadly unchanged, following a marginal rise in November."
Firms in the UAE's non-oil private sector continued to expand their purchasing activity in response to growth of new orders and higher output requirements. Data suggested that purchased items were only used to support higher output, rather than also to build stock holdings.
Inventories of inputs decreased for the first time in four months, with some firms linking this to efforts to manage cash flow more efficiently. Selling prices were reduced for the third successive month, albeit modestly. Companies were helped in the offering of discounts to customers by relatively weak input cost inflation.
Overall input prices rose only marginally in December, with both purchase and staff costs broadly following the overall trend, Emirates NBD said in its monthly PMI report, which was compiled by IHS Markit.
- waheedabbas@khaleejtimes.com