Economic optimism slowed for a third month running in October as levels of new employment in the country stagnated.
According to the UAE purchasing managers’ index (PMI), a measure of business activity in the non-oil private sector, economic sentiment slipped to its lowest level for six months last month as the amount of new work slowed.
The Emirates NBD-sponsored index, which covers manufacturing and services, slipped to 53.3, down from 54.1 in September.
A figure above 50 signals that businesses in the country are expanding, while below 50 signals a contraction.
The index, which is regarded as one of the earliest indicators of an economy’s performance, registered a combination of subdued demand and ongoing competitive pressures, which led firms to cut their charges for the 12th month running.
According to the index, which is based on replies to questionnaires sent to purchasing executives at about 400 UAE companies, managers reported that although their companies continued to grow output, export orders declined for the fourth consecutive month.
The jobs market stagnated with nearly all of the managers questioned (98 per cent) reporting that staffing levels remained the same as they had in September – a far cry from the fast-growing jobs market often reported by managers in the UAE.
Since the end of 2014, the UAE economy has suffered from an oil price freefall, which was at US$46.99 yesterday, from more than $115 per barrel in June 2014, prompting cuts in public spending and falling consumer demand. This has come at a time when global economic growth is also slowing as businesses worry about the effect of a slowdown in China and the UK’s Brexit decision on global growth.
“Growth of new business was substantially slower than that for output in October. In fact, the rate of increase was little-changed from September’s 75-month low,” said Khatija Haque, the head of Mena research at Emirates NBD.
“Data showed that falling exports was a factor behind relatively subdued demand, while anecdotal evidence pointed to slower market conditions.”
In Saudi Arabia managers’ economic optimism also declined in October, with the country’s PMI falling to its lowest level in seven years.
Saudi PMI fell to its lowest level since the survey first began in 2009, dropping to 53.2 in October, from 55.3 in September.
Managers reported a slowdown in both the amount of work they did and the amount of new business they won – both of which rose the least since the survey began. The number of new jobs created also slumped to a six-month low with the vast majority of surveyed companies (97 per cent) reporting no change since September.
At the end of September the Saudi government issued a royal decree reducing ministers’ salaries by 20 per cent and housing and car allowances for members of the advisory Shura Council by 15 per cent.
Wage increases were suspended and overtime and annual leave capped among lower ranking civil servants.
The move is part of the government’s National Transformation Plan, unveiled earlier this year, which aims to reduce public sector wages to 40 per cent of spending by 2020 from 45 per cent in June.
“The decline in the purchasing managers’ index in October was not unexpected, given the additional fiscal measures that came into effect last month including public sector wage cuts,” added Ms Haque.
lbarnard@thenational.ae
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