Economic sentiment in the UAE ticked up slightly last month, as businesses reported an increase in new orders and output, according to the latest survey of purchasing managers by Dubai lender Emirates NBD.
The UAE purchasing managers’ index (PMI), a measure of business activity in the non-oil private sector, rose to a10-month high last month, as the economic slowdown in the first half of the year prompted by the slump in oil prices appeared to have bottomed out, Emirates NBD said on Wednesday.
The index, which covers manufacturing and services, rose to 55.3 last month from 53.4 in June. A figure above 50 means business is expanding, while below 50 signals a contraction.
The index, which is seen as one of the earliest indicators of an economy’s performance, was still significantly lower than it had been the previous year, when it stood at 55.8.
According to economists at Emirates NBD, the index average for the past seven months stands at 53.7, down from an average of 56.8 during the same period a year ago.
“What we are seeing from this data is that the UAE economy is growing. It is just growing at a slower rate than it was last year,” said Jean-Paul Pagat, a senior economist at the bank. “Not everything is great, it’s more nuanced than that. It is encouraging that despite relatively weak exports, economic momentum is being supported by stronger domestic demand conditions.”
According to the index, which is based on replies to questionnaires sent to purchasing executives at about 400 UAE companies, managers reported increases in both the amount of new work they were receiving and the amount of work they were doing last month.
An increase in domestic spending was driving growth, while export orders fell for the first time in three months at the fastest pace recorded since the survey began, as concerns about the global implications of Brexit continued to darken the global economic picture.
The survey also found that job creation in the UAE rose to a 14-month high, although from a very low base over the second quarter, when employment was either stagnant or barely rising.
Since the end of 2014, the UAE economy has suffered from an oil price freefall, which was US$42 per barrel on Wednesday, from more than $115 per barrel in June that year, prompting cuts in public spending and falling consumer demand.
According to Emirates NBD’s Dubai Economy Tracker, Dubai’s economy grew at its slowest pace for more than five years last December, as property, construction and retail suffered.
In Saudi Arabia, it was a similar picture as the index rose to 56 last month, up from 54.6 the previous month – the strongest improvement in business conditions since November. The rate of job creation also increased at its fastest rate since October, the survey found.
However, researchers pointed out the rate of improvement in business conditions remained well below the series average of 58.5.
“Overall the surveys suggest that, following what appears to have been a sharp slowdown in the first half of the year, growth in the Arabian Gulf economies may have stabilised,” economic research consultancy Capital Economics said in a note on Wednesday. “That said, we don’t expect a marked rebound in activity. With oil prices set to remain low, the fiscal squeeze in the region is likely to continue for many years.”
lbarnard@thenational.ae
Follow The National's Business section on Twitter
