Growth in the UAE non-oil private sector economy climbed to the fastest pace seen since February 2015, while the same in Saudi Arabia continued to improve last month bolstered by sharp expansions in new orders and output.

UAE

New export orders rose for the first time in three months, with other GCC countries being mentioned as key sources of international demand, said the latest Emirates NBD PMI survey.

Moreover, the ongoing upturn in new business translated into job creation across the non-oil private sector. Increasing output requirements prompted firms to engage in purchasing activity, which contributed to a record rise in inventories. Meanwhile, firms continued to face upward cost pressures. In contrast, output charges stabilised during August.

The survey, sponsored by Emirates NBD and produced by IHS Markit, a world leader in critical information and analytics, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.

Commenting on the UAE PMI survey, Khatija Haque, head of Mena Research at Emirates NBD, said: “The August PMI survey shows a strong expansion in the non-oil private sector, underpinned by sharply higher output, new orders and inventories.  Firms have indicated that new projects and competitive pricing are supporting demand and activity in the non-oil sector.  This is in line with our view that investment ahead of Expo 2020 will be the key driver of the UAE’s non-oil growth over the next few years.”

Key findings

•    Headline PMI registers at 57.3 in August
•    New orders expand at the fastest pace since February 2015
•    Record rise in inventories

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 – climbed to a 30-month high of 57.3 in August from 56.0 in July. Moreover, the overall upturn in the non-oil private sector outperformed the long-run average.

The improvement in business conditions was driven by an increase in new orders. Moreover, the rate of growth was the sharpest in 30 months. Firms frequently linked new client wins to new projects, enhanced marketing initiatives and good quality products.  

A sharp rise in business activity also contributed to the overall improvement in the UAE’s non-oil private sector. Where an increase was registered, firms commented on favourable economic conditions.

New export orders rose for the first time in three months. The rate of growth was marginal, however. Surveyed companies cited other GCC countries as key sources of international demand.

The ongoing upturn in new business continued to translate into job creation during August. The rate of expansion was only marginal, however.

Companies engaged in purchasing activity during August, in response to greater output requirements. Consequently, inventories held by firms rose at the most pronounced rate in the survey’s history. This reflected firms’ forecasts of further improvements in market demand, according to panellists.

On the downside, firms continued to face intense input cost pressures, which mainly emanated from higher purchasing costs according to underlying data. In contrast, output charges stabilised during August as firms were reportedly unable to pass on higher cost burdens amid intensive competition. This ended a four-month sequence of falling output prices, however.

Lastly, business sentiment remained positive despite dipping to the lowest in three months. Business confidence was rooted in projections of further improvements in market demand and economic conditions.

Saudi Arabia

International demand for Saudi Arabian products and services picked up, as highlighted by a renewed increase in new export orders. Growth of staffing levels was sustained during August, as companies responded to greater capacity pressures by taking on extra staff.

Companies continued to face upward cost pressures, but their ability to fully pass on higher cost burdens to consumers was restricted by intensive competitive conditions. The rate of growth in inventories climbed to a record high, reflecting greater buying levels.

Commenting on the Saudi Arabia PMI survey, Haque said: “Saudi Arabia’s non-oil sectors expanded at a solid rate in August, with the headline PMI broadly unchanged from July.  The recovery in export orders helped boost overall new order growth to the fastest rate in four months in August, while output also showed a sharp rise last month.”    

Key findings

•    Headline PMI rises to 55.8 in August
•    Sharp increases in output and new orders
•    Record rise in inventories

The Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) edged up to 55.8 in August from 55.7 in July. This was consistent with the strongest improvement in operating conditions since April. However, the headline PMI remained below its long-run average (58.1).

The upward movement in the headline index was supported by a sharper increase in new orders. The rate of growth in new work quickened to the fastest in four months. More projects and stronger underlying demand were cited by panellists as the key factors behind greater inflows of new business.

Despite softening from the preceding month, output grew sharply. Panellists attributed the rise in business activity to favourable economic conditions.

Companies observed a renewed expansion in new export orders during August. Growth was recorded for the second time in the past five months. Opportunities arising from new export markets were frequently linked by panellists to stronger international demand for Saudi Arabia’s products and services.

Firms faced capacity pressures for the tenth successive month and raised payroll numbers accordingly. The rate of job creation slowed to the weakest since April, however.

Companies purchased greater quantities of inputs during August. As a result, inventories were accumulated at the sharpest rate in the survey history.

Firms faced higher cost burdens during August, with both purchasing prices and staff salaries rising further. Consequently, firms passed on higher input costs to consumers. However, the pace of output price inflation was only marginal.

Although the level of positive sentiment dipped to the lowest since October 2016, firms retained positive expectations over the 12-month outlook for output. Optimism was rooted in forecasts of further improvements in market demand. – TradeArabia News Service