UAE private sector economy slows in December on lower output and orders

The latest expansion of business activity was solid overall but was slower than in November

Burj Khalifa lit up with the UAE flag. The UAE non-oil economy slightly moderated in December. Leslie Pableo / The National

The growth in the UAE's non-oil economy was moderate in December, expanding at its slowest level since October 2016, as output and new orders fell, according to a survey.

The seasonally-adjusted Emirates NBD UAE Purchasing Managers’ Index, a composite indicator that gives an overview of operating conditions in the non-oil private sector economy, dropped to 54 in December from 55.8 in November, the lender said on Thursday. A reading above 50 indicates expansion, while a reading below 50 signals contraction. The report is sponsored by Dubai’s biggest lender and compiled by IHS Market.

The drop in the headline figure reflected smaller contributions from all five constituent indices, suggesting a broad slowing of growth across the non-oil private sector at the end of 2018.

The latest expansion of business activity was solid overall as new orders increased again, but was slower than growth in November. New orders rose at the weakest pace since August. The offering of discounts in a competitive marketplace reportedly contributed to rises in both activity and new business, according to the survey.

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“Efforts to control costs in a competitive environment led companies to leave their staffing levels broadly unchanged and reduce their stocks of purchases for the first time in four months,” the survey found.

Efforts to control costs discouraged companies from hiring additional workers at the end of 2018, despite increasing new business.

December data signalled a slowdown in the rate of growth in new export business. Although orders from abroad increased for the ninth consecutive month, the rate of expansion was the joint-weakest in this sequence.

Anecdotal evidence suggested that new export business had mainly been secured from clients in neighbouring countries, the survey said.

Companies generally remained optimistic that business activity will continue to increase over the course of 2019. Optimism was based on expectations of improving economic conditions and success in securing additional sales over the next 12 months.