The UAE’s non-oil private sector economy slowed in February, with business conditions improving at their weakest rate in five months, impacted by slower output growth and softer job creation, according to the latest survey by Emirates NBD.
The bank's seasonally adjusted purchasing managers’ index – a composite indicator designed to give an overview of operating conditions in the non-oil private sector economy – eased to 55.1 during February, from 56.8 in January, the lowest rate since last September.
A reading above 50 suggests the non-oil economy is growing, while a reading below 50 suggests a contraction.
Output growth slowed to a nine-month low during February and weaker growth weighed on business confidence, which registered a six-month low after falling sharply since the start of 2018.
However, non-oil private sector firms reported an uptick in new business in the latest survey. The rate of expansion was slightly above the average seen over the course of 2017, Emirates NBD said.
In particular, new orders from abroad rose for the third month running and job creation rose for the 22nd consecutive month, albeit at its slowest pace since June 2017.
The rate of inflation – while solid overall – fell below the long-run average, and output charges declined in February’s survey. The reduction in cost pressures allowed firms to reduce prices to stimulate client demand, the bank said.
“The February PMI survey shows a solid rate of growth in the UAE’s non-oil private sector, although it was slower than we’ve seen in recent months,” said Khatija Haque, head of Mena research at Emirates NBD.
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Read more:
[ Dubai's non-oil economy index dips in December ]
[ Dubai non-oil index slips in November as job creation slows ]
[ Saudi Arabia records 'soft' non-oil private sector growth in January ]
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“The key components of the survey point to strong domestic demand but firms were notably more cautious than they were in January about the prospects for output growth over the coming 12 months.”
Meanwhile, Emirates NBD’s PMI gauge for Saudi Arabia was little changed in February, at 53.2 compared to 53.0 in January.
While the index was at its joint-second lowest reading since the survey’s inception in August 2009, the figure remained above the critical 50 no-change mark and thereby signalled an overall improvement in business conditions in the kingdom.
An unprecedented reduction in selling prices in February’s survey data showed ongoing muted improvement in Saudi Arabia’s non-oil private sector, driven by further subdued output growth.
New orders grew at the slowest pace on record, while foreign demand contracted and firms reduced selling prices at the fastest rate since the survey began to stimulate client demand, according to the survey.
“While the pace of expansion in Saudi Arabia’s non-oil sector was slow by historical standards in February, firms were much more upbeat about prospects for the coming year, citing new project wins and stronger growth prospects,” said Ms Haque.