2015 ended on a low note for UAE

|By Arabian Post Staff| The UAE’s non-oil private sector ended the year on a low note, with business conditions improving at the slowest rate in 40 months, the headline Emirates NBD UAE Purchasing Managers’  Index  for December  showed.

A key factor weighing on the sector as a whole was relatively muted growth of new work – the pace of expansion was the weakest since August 2011. Output, employment and input buying also rose more slowly, while charges decreased as firms competed to secure new clients.

The survey contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.

After adjusting for seasonality, the index pointed to a loss of growth momentum in December. Falling from 54.5 in November to 53.3, the latest reading was the lowest since August 2012. Despite still signalling a solid improvement in business conditions, it meant that the fourth quarter was the weakest on average (53.9) since Q3 2012.

Underpinning the overall slowdown was a subdued expansion in new orders placed with UAE non-oil private sector companies. The latest rise was the least marked in nearly four-and-a-half years, albeit robust overall. New business from abroad followed a similar trend, with growth softening but remaining solid. Some panelists linked higher new work to improving market conditions both domestically and abroad, while others made reference to gains generated from marketing efforts.

Growth of new work was sufficient to motivate firms to raise their output further in December. The rate of expansion moderated in line with the headline index, though it remained slightly faster than the long-run average.

Another factor behind the overall easing was slower job creation at the end of 2015. Employment rose only modestly, as signalled by the respective index dropping below the 2015 average. Meanwhile, the level of unfinished work was unchanged in December, following a 19-month period of expansion. Data suggested that the absence of capacity pressures was at least partly due to the relative weakness of order books.

Input buying continued to rise in December, stretching the current upward trend to 65 months. The rate of growth eased, however, to the weakest since April 2013. Subsequently, stocks of purchases expanded at a slower pace.

On the price front, cost pressures remained modest in December.  Both salaries and purchasing costs rose more slowly, thereby restricting the overall rate of input price inflation.

Data for charges pointed to something of a squeeze on UAE non-oil private sector businesses. Tariffs fell for the second month running, with some panelists commenting on the need to offer discounts in order to capture new business.