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UAE business growth slows

DUBAI — The UAE non-oil private sector grew at the slowest pace in 15 months in August, a survey conducted by HSBC Bank and Markit Economics revealed on Wednesday.

The purchasing managers index (PMI) for the non-oil private sector dropped to 50.9 in August from 53.3 in July. A PMI reading above 50 indicates expansion in the sector, while one below suggest decline. The latest reading was the lowest in 15 months.

“Underlying the weaker headline figure were slower rises in both new business and employment, a stagnation of output and a fall in input stocks,” the bank said.

“New business growth continued to slow during the latest survey period, reaching a one-year low. The rate of increase in new work has cooled sharply over the past two months from the series record rates recorded in the second quarter. However, data suggested that the latest moderation was largely centred on the domestic market as new export orders rose at a sharper pace, boosted by a weaker dirham. Where higher takings were reported, firms commented on good demand, competitive pricing and successful promotional activities,” HSBC said.

Production, meanwhile, remained unchanged in August, ending one-and-a-half years of expansion.

Employment in the non-oil private sector expanded at a moderate rate during the month, reflecting the softer order growth. Input price pressures remained at elevated levels. Despite that, companies reduced their selling prices in August, though moderately, in order to remain competitive and attract 
more customers.

The easing trend in new business growth was reflected by firms’ output levels, which were unchanged on the month. This followed one-and-a-half years of expansion. By size, large firms outperformed SMEs in August.

“The volume of unfinished work across the non-oil private sector fell again during August, which panellists linked to manageable workloads, efficient order processing and timely goods dispatch. Moreover, the rate of reduction was the most marked for over a year,” the survey report said.

Buying activity and employment each expanded at more modest rates in August, reflecting milder growth of new orders. While the increase in purchases was the slowest since last November, the rate of job creation was a series record low. A weaker rise in input acquisitions, alongside intentional stock shedding, resulted in the first drop in input stocks for 10 months, the report pointed out.

Maintaining the series trend, lead times shortened in August. Reports indicated that faster deliveries resulted from competition amongst vendors and their need to secure new orders.

The bank said with regard to prices, input cost inflation was unchanged overall during August as a slower rise in purchase prices were outweighed by a faster increase in staff costs. Nevertheless, total input price pressures remained considerable and comfortably above the series trend. Although all three company size categories monitored by the survey posted sharp rises in their average input costs since July, large firms registered the steepest inflation.

The survey shows that average salaries and wages paid to UAE non-oil private sector workers rose for the ninth month in succession in August, and at a sharper pace. Companies monitored by the survey indicated that staff cost inflation principally reflected performance-related pay increases and longer working hours.

· issacjohn@khaleejtimes.com