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Solid improvement in business conditions in February
Dubai, March 3rd, 2016
Growth of the UAE's non-oil private sector gathered speed in February, having slowed in four of the previous five months. The overall improvement in business conditions was helped by expansions in output, new orders and employment. All three variables rose slightly faster than in January, but the respective indexes remained below long-run trends. Meanwhile, with total cost pressures remaining muted, firms cut charges to the greatest extent since March 2010 as they competed to secure new clients.
The survey, sponsored by Emirates NBD and produced by Markit, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.
Commenting on the Emirates NBD UAE PMITM, Khatija Haque, Head of MENA Research at Emirates NBD, said.
"The improvement in the Emirates NBD UAE PMI last month is encouraging, particularly against a backdrop of low oil prices, global growth concerns and a strong USD. However, the rate of growth in the non-oil private sector remains much weaker than a year ago, when the headline PMI registered 58.1. We expect the environment over the coming weeks to remain challenging, with several global factors weighing on sentiment and activity."
Key Findings
§ Slowdown ends as PMI rises from near-four year low
§ Rates of growth in output and new orders pick up slightly
§ Tariffs drop at fastest pace in almost six years
The headline 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 53.1 in February, from 52.7 in January. With the previous reading being the lowest since March 2012, the latest figure was still below the series average (54.5). Nonetheless, it bucked the recent trend of slowing growth, and was consistent with a solid improvement in business conditions overall.
Both output and new orders rose more quickly in February, contributing to faster growth of the sector as a whole. The respective rates of expansion were marked but slower than on average over the survey's history, having picked up only fractionally since the prior month. Higher new work was partly a result of lower tariffs, according to panellists. Meanwhile, data indicated that a rebound in growth of new export business had supported total new orders at UAE non-oil private sector firms.
Faster job creation was another factor behind the rise in the headline index during February. Employment rose at the quickest pace in three months, albeit only moderately overall. Anecdotal evidence linked hiring to rising workloads. The increase in new work was also sufficient to lead to further growth of outstanding business. Backlogs were accumulated for the second month running, following no change in December.
With regard to purchasing, the rate of expansion in input buying was broadly the same as in January, while the accumulation of pre-production inventories was unchanged. The start-up of new projects was reportedly behind higher purchasing activity, while stocks were raised at companies that expected future improvements in demand.
Finally, prices data signalled lower charges amid slowly rising input costs. Overall cost pressures were muted relative to the series average, with salaries and purchase prices both increasing only modestly. In the case of purchasing costs, there were reports that strong competition among suppliers had restricted inflationary pressure. Subsequently, output prices in the UAE's non-oil private sector dropped for the fourth straight month. Furthermore, the rate of decline was the sharpest in nearly six years. A number of firms opted to give discounts in an effort to attract new clients.
-Ends-
The next UAE PMI Report will be published on April 5th 2016 at 09:30 (DUBAI) / 05:30 (UTC)
For further information, please contact:
Ibrahim Sowaidan
Head - Group Corporate Affairs
Emirates NBD
Telephone: +971 4 609 4113 / +971 50 6538937
e-mail: ibrahims@emiratesnbd.com
Tricia Rego
ASDA'A Burson-Marsteller; Dubai, UAE
Tel: 971-4-4507600; Fax: 971-4-4358040
Email: tricia.rego@bm.com
Khatija Haque
Head of MENA Research, Emirates NBD
Email: KhatijaH@emiratesnbd.com
Joanna Vickers
Corporate Communications
Markit
Tel: +44-207-260-2234
Email: joanna.vickers@markit.com
Philip Leake
Economist
Markit
Tel: +44-1491-461014
Email: philip.leake@markit.com
The Emirates NBD UAE Purchasing Managers' Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in approximately 400 private sector companies, which have been carefully selected to accurately represent the true structure of the United Arab Emirates non-oil economy, including manufacturing, services, construction and retail. The panel is stratified by Standard Industrial Classification (SIC) group, based on industry contribution to GDP. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the 'Report' shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the 'diffusion' index. This index is the sum of the positive responses plus a half of those responding 'the same'.
The Purchasing Managers' Index™ (PMI™) is a composite index based on five of the individual indexes with the following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers' Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times index inverted so that it moves in a comparable direction.
Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease. Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.
About Emirates NBD
Emirates NBD is a leading banking Group in the region. As at 31st December 2015, total assets were AED 406.6 Billion, (equivalent to approx. USD 110.7 Billion). The Group has a leading retail banking franchise in the UAE, with more than 220 branches and over 940 ATMs and CDMs in the UAE and overseas. It is a major player in the UAE corporate and retail banking arena and has strong Islamic banking, Global Markets & Treasury, Investment Banking, Private Banking, Asset Management and Brokerage operations.
The Group has operations in the UAE, Egypt, the Kingdom of Saudi Arabia, Singapore, the United Kingdom and representative offices in India, China and Indonesia.
The Group is an active participant and supporter of the UAE's main development initiatives and of the various educational, environmental, cultural, charity and community welfare establishments.
About Markit
Markit is a leading global diversified provider of financial information services. We provide products that enhance transparency, reduce risk and improve operational efficiency. Our customers include banks, hedge funds, asset managers, central banks, regulators, auditors, fund administrators and insurance companies. Founded in 2003, we employ approximately 4,000 people in 11 countries. Markit shares are listed on Nasdaq under the symbol MRKT. For more information, please see www.markit.com.
The intellectual property rights to the Emirates NBD UAE PMI™ provided herein are owned by or licensed to Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit's prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information ("data") contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index™ and PMI™ are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. Emirates NBD use the above marks under licence. Markit is a registered trade mark of Markit Group Limited.
© Press Release 2016
