UAE non-oil growth eases

GMT 22:15 2015 Wednesday ,04 November

Arab Today, arab today UAE non-oil growth eases

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The UAE non-oil private sector lost further growth momentum at the start of the fourth quarter with business conditions improving at the least-marked pace in two-and-a-half years, according to a key indicator released on Tuesday.

Along with the UAE, Saudi Arabia and Egypt, two of the region's largest economies, registered continued declines.

For the UAE, underpinning the slowdown were weaker expansions in output and new orders, but the respective rates of increase were nevertheless robust overall. Employment rose only modestly, as did stocks of purchases. On the price front, total input costs continued to increase solidly, while charges rose only marginally amid reports of competitive pressures, according to Emirates NBD, a leading Dubai-based lender.

The Emirates NBD Purchasing Managers' Index for the UAE fell to 54 from 56 in September, the lowest since April 2013, the bank said.

The index for Saudi Arabia dropped for a second month in a row to 55.7 in October, the lowest level since the survey began in 2009, driven by weaker expansion in new business as the slump in oil prices started sapping growth momentum. In Egypt, business conditions also worsened at the quickest pace since February, PMI data showed, as a shortage in power supply and foreign currency continued to undermine output.

Khatija Haque, head of Mena research at Emirates NBD, said the October PMI data for the UAE supports the view that activity in the non-oil private sector of the UAE has slowed this year, with average PMI in the first 10 months of 2015 at 56.5, down from 58.1 in the same period last year. "Although the impact on headline real GDP growth is partially offset by higher oil production, the latest PMI data supports our decision to revise down our 2015 growth forecast for the UAE to four per cent [from 4.3 per cent previously] in September."

In the UAE, output and new business both showed similar trends to the headline index during October. "The rates of growth were the slowest in 24 and 42 months respectively, but remained sharp overall. Stronger market conditions, promotional activities and the opening of new branches were all mentioned as factors behind higher new work, while data signalled that a renewed increase in new export orders also contributed. As a result, panellists were motivated to raise their output further," the bank said.

"Reflective of slower growth of incoming new work, UAE non-oil private sector firms were more cautious with regard to their purchasing in October. Growth of buying activity eased for the second month running, leading to a weaker expansion in stocks of purchases. In fact, the rate of inventory building was the slowest observed since September 2013," Emirates NBD said.

For Saudi Arabia, the biggest Arab economy, the slower growth in private industries in October is "unsurprising in the context of sharply lower oil revenues and tighter liquidity conditions," Haque wrote. "However, the rate of expansion in the non-oil sector is still relatively robust." The Saudi government is already searching for budget savings, is contemplating project delays and has sold bonds for the first time since 2007. The country relies on oil for at least 80 per cent of its revenue. While rates of growth in output, new orders and employment all eased, "the sector remained firmly in expansion territory overall".

The bank said data for prices signalled a moderation in cost pressures faced by UAE non-oil private sector companies.

Source: Khaleej Times

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