Dubai: Non-oil private sector growth momentum in the UAE slowed a little in April, with the Emirates NBD Purchasing Managers’ Index (PMI) easing to 52.8 from 54.5 in March.
The PMI data for the month showed business conditions improved at their weakest pace in three months.
Output, new orders and input stocks all rose more slowly, but the main drag on the sector was a stagnation in employment.
“Growth momentum in the UAE slowed a little in April after rebounding in March. External demand remains relatively subdued, and firms appear to be reluctant to increase hiring, despite solid growth in new orders and output last month. The PMI data year-to-date points to slower, but still positive, growth in the UAE’s non-oil sector, which is in line with our expectation for slower real GDP growth in 2016,” said Khatija Haque, head of Mena Research at Emirates NBD.
Output and new order growth was solid, but slower than in March. Export orders declined marginally for the second month in a row, suggesting that external demand remains subdued and this weighed on overall new order growth last month. However, domestic demand appears to remain robust.
Firms surveyed cited better marketing and price discounts as contributing to new orders in April. Firms did not hire more staff last month, despite the continued rise in new work and output. The employment sub-index fell to the neutral 50, signalling no change in employment for only the second time since the survey began in August 2009.
Margins remained under pressure as input costs rose at a similar rate to March, while output prices fell for the sixth consecutive month. Both the rise in input costs and the decline in output prices was modest.
Reflecting the slower expansion in new orders, growth of purchasing activity eased in April. In fact, the increase was the least marked in three years.
Some panellists indicated that they had sufficient inventories, and this was borne out by data which showed input stocks rising at the slowest pace since September 2013.
Only 4 per cent of firms surveyed noted an increase in inventory in April, with the majority of respondents saying their stocks of purchases were unchanged last month.
On the price front, the rate of input cost inflation remained historically muted in April. In particular, purchase prices rose to the least extent in three months.
Relatively weak cost pressures enabled firms to cut charges again. The latest fall was the sixth in as many months. There were reports that greater competition had led companies to reduce their tariffs.
The average PMI in the first four months of 2016 stood at 53.3, down from 57.6 in the same period in 2015.
“The April 2016 PMI was slightly lower than the average year-to-date, providing further support to our view that real GDP growth in the UAE is likely to slow this year. We maintain our forecast of 3 per cent real GDP growth in the UAE this year, down from an estimated 4 per cent in 2015,” said Haque.
