Abu Dhabi, UAESunday 29 March 2020

UAE economy continues to expand, but prices soften

PMI data shows employment levels increased marginally for the fifth successive month

Shoppers on an escalator in the Al Ain Center Computer Plaza. Business activity in the UAE increased in July, with companies reporting a rise in new orders. Victor Besa/The National
Shoppers on an escalator in the Al Ain Center Computer Plaza. Business activity in the UAE increased in July, with companies reporting a rise in new orders. Victor Besa/The National

Business activity in the UAE's non-oil economy continues to rise, with the amount of new orders expanding, but at a slower pace than in previous months.

IHS Markit’s seasonally-adjusted UAE Purchasing Managers' Index stood at 55.1 in July, which was slightly lower than the 57.7 recorded in June, but still firmly in positive territory. A reading above 50 indicates economic expansion.

Higher sales underpinned the growth in activity, and employment levels increased marginally for the fifth consecutive month.

“Companies were at least partly reliant on price discounting to secure new orders, suggesting some weakness in underlying demand. They were helped in this regard by a lack of cost inflation in July,” said Andrew Harker, associate director at HIS and the report’s author.

Output prices fell for the tenth successive month, but the pace of decline was described as “modest”. Input costs were largely flat, with no increase reported either in purchase prices or staff costs.

In terms of the outlook, IHS Markit said that improving market conditions, higher rates of new orders and Expo 2020-related activity are all expected to support an increase in business activity over the coming 12 months.

The UAE economy grew an annual 2.2 per cent from a year earlier in the first three months of this year as the non-oil sector continued to gain momentum on the back of government spending, the Central Bank of the UAE said in June. The non-oil economy grew 1.6 per cent in the three months to the end of March from the same period a year earlier.

In May, the Central Bank revised down its overall 2019 economic growth forecast to 2 per cent from 3.5 per cent, as Opec’s third-largest producer reduced output and the global economy continues to slow due to trade tension between the US and China. The UAE economy, the Arab world's second largest, accelerated 1.7 per cent last year.

Updated: August 5, 2019 12:46 PM

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