UAE non-oil private sector continues ‘robust growth’, HSBC’s PMI survey shows

Comes even as new orders grew by their lowest rate since August 2013, according to data from the monthly HSBC Purchasing Managers Index survey compiled by Markit.

Payroll numbers in the non-oil private sector rose last month, slightly higher than April’s. Sarah Dea / The National

Private-sector business conditions and sentiment in the UAE and Saudi Arabia continue to be largely unaffected by falling oil prices, according to an influential survey.

The UAE’s non-oil private sector continued to record “robust growth” last month, according to data from HSBC’s Purchasing Managers’ Index (PMI) survey, even though the headline index dipped to 56.4 from 56.8 in April.

Saudi Arabia’s headline PMI fell to 57 last month from 58.3 in April, but it indicated “another robust improvement in business conditions”, said Markit Economics, who carried out the survey.

Manufacturing output weakened but new business grew last month in the kingdom.

An index score above 50 indicates a net expansion in economic activity over the previous month, while a score below 50 indicates contraction.

“PMIs in the Arabian Gulf remain comfortably above the 50 mark,” said Jason Tuvey, an economist at Capital Economics. “The upshot is that there are still no signs that lower oil prices are pushing these economies towards recession as some had feared.”

In the UAE, the output sub-index rose at its fastest rate for three months, rising to 62.8 points last month from 62 points in April.

But the score on new orders fell to 60.9 last month from 62.1 in April.

The latest score, the lowest since August 2013, suggests that domestic demand in the UAE may be struggling, according to Mr Tuvey.

Meanwhile, payroll numbers in the non-oil private sector rose last month, slightly higher than April's, buoyed by an increase in new projects and new branch openings.

“The UAE’s non-oil private sector continued its robust growth trend during May, supported by marked expansions in output and new business,” said Philip Leake, a Markit economist.

“With employment also rising solidly, the PMI looks set to remain comfortably inside growth territory over the coming months.”

Saudi Arabia’s PMI score of 57.0 last month is well within positive territory but it is also the worst in 12 months.

“That adds to the evidence that the boost to the kingdom’s economy from a bonus paid to public sector workers following King Salman’s accession to the throne in January has faded,” said Mr Tuvey.

“There could be further weakness ahead, with the new orders component [of PMI] at its lowest level in almost four years.”

In Egypt, the headline PMI score inched up to 49.9 last month, its best score this year, from 49.8 in April.

“The latest data for Egypt highlighted a further worsening in business conditions during May, led by a stagnation in new orders,” said Mr Leake.

“However, the rate of contraction was negligible, with expansions in output and employment suggesting that the headline index could signal improvement in the near future.”

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