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Abu Dhabi, UAESunday 24 June 2018

UAE PMI score recovers in June

Output and order growth rising, but prices continue to fall

UAE businesses are optimistic about growth prospects, even as they continue to cut prices. Reem Mohammed / The National
UAE businesses are optimistic about growth prospects, even as they continue to cut prices. Reem Mohammed / The National

A key gauge of the health of the UAE’s non-oil private sector economy saw its first improvement in three months in June, even as firms continue to cut prices to secure growth.

The Emirates NBD UAE Purchasing Managers’ Index rose to 55.8 last month from 54.3 in May, bolstered by faster output and higher order growth. The rise in orders comes as average selling prices fell for the third month in a row, with firms also citing increased marketing efforts to support order books.

The bank sponsors the monthly survey of business conditions in the UAE's non-oil private sector undertaken by Markit, a financial information services company.

A reading above 50 suggests that the non-oil economy is growing, while a reading below 50 suggests that it is contracting.

Firms surveyed reported that external demand softened slightly in June, with a marginal drop in new export orders. Employment remained broadly stagnant during the month, with the index declining slightly to 50.4 from 50.7 in May.

"This is disappointing against a backdrop of strong rises in output and new orders, and supports the view that firms are reluctant to boost hiring in an environment where their margins continue to be squeezed," Emirates NBD said in a statement.

"While businesses are optimistic about the coming year, the business optimism index fell to 56.5 in June, the second-lowest level on record, [while] just under 13 per cent of firms expected output to be higher in twelve months’ time, compared to 23.6 per cent in May."

Emirates NBD recently cut its forecast for the UAE's real GDP growth for 2 per cent for 2017, due to the projected contraction in oil production for the year, following the extension of an output reduction deal by Opec and non-Opec producers in June.

Elsewhere, the bank's PMI Index for Saudi Arabia declined for a second consecutive month to 54.3 for June, the index's lowest reading since October 2016. Business optimism fell sharply during the month, with lower oil prices likely to have dampened business sentiment.

In Egypt, the PMI index was broadly unchanged at 47.2 for the month, indicating a contraction in the non-oil private sector for the 21st consecutive month. The bank noted however that the rate of contraction has slowed markedly since the devaluation of the Egyptian pound in November, with signs that the country's economy is beginning to stabilise.