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OUTPUT, NEW ORDERS SOAR

Steep expansions in output, new orders alongside solid
export demand growth underpinned the upturn.

UAE, Saudi Arabia non-oil sectors post record growth

DUBAI/RIYADH, January 4, 2018

UAE’s non-oil private sector saw the sharpest growth in 34 months during December, while the same in Saudi Arabia witnessed solid gains during the month, with the pace of growth staying above the average registered throughout the year.

UAE

Steep expansions in output, new orders alongside solid export demand growth underpinned the most recent upturn, according to the     Emirates NBD UAE PMI survey, sponsored by Emirates NBD and produced by IHS Markit, a world leader in critical information and analytics. The survey contains original data collected from a monthly survey of business conditions in the non-oil private sector.

In terms of inflation, input cost pressures softened during December, whilst selling prices fell for the fourth month running.

Commenting on the UAE PMI survey, Khatija Haque, head of Mena Research at Emirates NBD, said: “The UAE’s non-oil sector expanded sharply in the last two months of the year, largely due to a strong rise in output and new orders.  It is likely that the introduction of VAT in January has spurred activity and purchasing in Q4 2017, which is in line with our expectations.  Nevertheless, employment and wage growth has been relatively muted, not just in December but for 2017 as a whole.”

Key findings

•    Headline PMI rises to 57.7 during December, from 57.0
•    Sharpest expansion in new business since January 2015
•    Output prices continue to fall

The headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI) – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – rose from 57.0 to 57.7 in December, thereby signalling a sharp improvement in business conditions in the non-oil private sector. Furthermore, the pace of expansion was the fastest since February 2015.

Non-oil private sector firms in the UAE reported sharp growth in output during the latest survey period. The pace of expansion remained strong in the context of historical data, despite easing since from the 33-month high registered in November.

New order growth accelerated to a 35-month high December. The rate of expansion was sharp overall and comfortably above the historical series average. Panel members frequently commented on a strong level of underlying demand, whilst others reported an increasing inflow of new business from government sources.

After contracting in November, new export orders returned to expansion during the latest survey period. Moreover, the rate of growth was solid overall and the strongest recorded in nine months. According to anecdotal evidence, demand from neighbouring GCC countries picked up in December.

In response to rising output requirements, firms continued to hire additional staff in the non-oil private sector. The latest data thereby extended the current sequence of job creation to 20 months. That said, the rate of hiring remained subdued in the context of historical data.

On the price front, input prices continued to increase during December, in line with the trend seen since June. That said, the rate of inflation eased to a three-month low.

Contrary to the trend seen for input prices, output charges fell in December. Companies reduced selling prices to stimulate client demand, according to panel member reports. That said, the rate of price discounting was only modest overall.

Buying activity growth remained sharp during December’s survey period. Companies operating in the UAE’s non-oil private sector increased their purchasing volumes in anticipation of an upturn in output requirements.

Saudi Arabia

Strong increases in both output and new orders contributed to the upturn. On the price front, input cost inflation accelerated to a 16-month high, according to the ENBD Saudi Arabia PMI survey.

“The December PMI survey continued to show a strong rate of expansion in December, and the data suggests that non-oil growth accelerated in the final quarter of 2017, as well as for the year as a whole compared to 2016,” said Haque.

“Nevertheless, we expect headline GDP growth to be close to zero in 2017 as substantial oil production cuts will offset the expansion in the non-oil sectors of the economy. We are more optimistic about growth prospects in 2018 however.”    

Key findings

•    Headline PMI little-changed at 57.3
•    Strong growth in both output and new orders
•    Input price inflation sharpens to 16-month high

The headline seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) – a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy – fell fractionally to 57.3 during December, from 57.5. That said, the latest figure signalled that the rate of expansion remained steep overall and above the average registered throughout 2017.

Despite easing since the preceding survey period, non-oil private sector companies in Saudi Arabia continued to report steep rates of expansion in output. According to anecdotal evidence, strong underlying demand in the domestic market alongside rising new orders from neighbouring economies both contributed to higher output requirements.

In line with the trend seen since the survey began in 2009, inflows of new business received by Saudi Arabian non-oil private sector firms increased once again during December. The rate of expansion was sharp overall, albeit below the series’ historical average.

New export orders expanded during December, thereby extending the current sequence of growth to five months. Furthermore, the rate of increase accelerated to its fastest since August.

Continuing the sequence registered since April 2014, non-oil private sector companies in Saudi Arabia continued to hire additional staff in December. That said, the rate of job creation remained slight overall and slower than the series’ long-run average.

In terms of inflation, average cost burdens rose at a marked pace during December’s survey period. Increased demand for raw materials led suppliers to increase prices, according to panel member reports. Despite the marked increase in input costs, selling prices only rose at a fractional pace overall amid strong competitive pressures in the non-oil private sector.

December’s survey signalled a sharp expansion in purchasing activity. Panel members increased input buying in anticipation of rising output requirements.

On a less positive note, business confidence towards future growth prospects eased during December. That said, firms remained optimistic overall. An expected upturn in business conditions and rising marketing activity were both forecast to underpin output growth over the next year. – TradeArabia News Service




Tags: UAE | Saudi | Private sector | non-oil |

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