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UAE PMI: Economy expands at a steady rate in October

Today sees the release of October data from the Emirates NBD Purchasing Managers’ Index® (PMI®) for the UAE.

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

Commenting on the UAE PMI® survey, Khatija Haque, Head of MENA Research at Emirates NBD, said:

“The headline UAE PMI eased to 55.0 in October from 55.3 in September.  It has been broadly stable between 55 and 56 for the last four months, indicating growth in the UAE’s non-oil private sector at a similar rate to last year, when official GDP data showed the non-oil sector expanded 2.5%.

Output growth slowed to the weakest in six months in October, despite relatively robust new order growth.  Anecdotal evidence suggested that promotions and price discounts likely contributed to the rise in new orders last month.  Indeed, new export order growth also slowed sharply last month.

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Employment was broadly flat in October after declining in the prior two months.  Staff costs, a good proxy for wages, were also largely unchanged last month.  The softness in the labor market is at odds with output and new work growth.  However, the increased margin pressures in October likely contributed to firms’ reluctance to boost hiring.

Margins were squeezed further in October as input costs rose while selling prices declined.  Input cost inflation was the fastest since April, on higher fuel and raw materials prices.  Meanwhile, output prices declined at the sharpest pace in 3 months in October. Selling prices have declined on average in five of the last six months, as firms have had to compete for new business and to stimulate demand.

Business optimism about future output rose to a record high in October, with nearly 78% of firms surveyed indicating they expected their output to be higher in a year’s time.  The surge in oil prices, as well as announcements of increased government spending and Expo 2020 investment, may have contributed to improved sentiment last month.

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The main findings of the October survey were as follows:                                                                                        

Headline PMI falls to 55.0 in October, from 55.3 in September

A sharp increase in new orders

Business confidence hits record-high

The headline seasonally adjusted 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 – fell to 55 in October, from 55.3 in the preceding survey. The latest expansion remained marked overall and above the historical average nonetheless.

Non-oil private sector companies in the UAE reported another increase in new business during October. Anecdotal evidence suggested that promotional activity was partly linked to the improvement. That said, new orders from abroad grew at the weakest pace since March.

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Meanwhile, output increased at a weaker pace in the latest survey period. In fact, the rate of growth was the slowest in six months. The expansion remained sharp overall, however, and was linked to rising inflows of new business.

Business confidence across the non-oil private sector hit its highest since the index began in 2012. Promotional activity, investment surrounding Expo 2020 and new product launches attributed to positive sentiment.

On the price front, output charges fell in October following a marginal rise in September. Respondents linked the fall to competitive pressures in the non-oil private sector. The rate of decline was the fastest since July.

Input price inflation accelerated in the most recent survey period. The rate of inflation was the strongest since April. Nonetheless, it remained below the long-run average.

The employment index was a touch above the neutral 50-level, thereby ending a two-month sequence of job shedding. Some firms linked the increase to rising output requirements. The rate of growth was only fractional, however.

Reflecting higher output requirements, firms increased their purchasing activity in October. The rate of expansion accelerated notably since September and was the strongest registered since February.

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Adjusted for seasonal factors, the Output Index for the UAE’s non-oil private sector registered above the neutral 50.0 threshold during October, thereby signaling an increase in output. Growth has been recorded continuously on a month-by-month basis since February 2010. Moreover, the rate of growth eased to a six month low in the latest survey.

New Orders

The latest survey data signaled a further sharp improvement in new orders across the UAE’s non-oil private sector. Rising inflows of new business have been recorded continuously since the survey’s inception in August 2009. Approximately 32% of firms noted an increase in new orders, compared with 14% of companies that reported a reduction.

Export Orders

The seasonally adjusted New Export Orders Index registered above the 50.0 no-change mark for the seventh month running during October. The indicated rate of expansion was moderate overall, however, and the slowest in the aforementioned period. Furthermore, the latest improvement was below the historical average.

Backlogs of Work

Continuing the current phase of expansion seen since January 2017, the seasonally adjusted Backlogs of Work Index scored above the neutral 50.0 threshold once again. The rate of build-up in work outstanding eased since September, reaching a five-month low in October. The increase remained strong in the context of the series’ history nonetheless.

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Suppliers’ Delivery Times

Vendor performance across the non-oil private sector improved during the latest survey period, as signaled by the seasonally adjusted Suppliers’ Delivery Times Index registering above the crucial 50.0 mark in October. Wait times shortened at a solid pace which was broadly in line with that seen in September.


The seasonally adjusted Employment Index registered above the critical 50.0 mark during October, thereby ending a two-month sequence of job shedding. The increase in payroll numbers was fractional overall, however, and below the historical average. Some firms linked new hires to higher backlogs of work.

Output Prices                                                                                        

October data signaled a reduction in output charges across the UAE’s non-oil private sector. The finding followed an increase in selling prices during September. Anecdotal evidence linked falling selling prices to competitive market pressures. The decrease was modest overall and the fastest since July.

Overall Input Prices

Average cost burdens faced by non-oil private sector businesses in the UAE increased at the fastest pace since April during the latest survey period. Panel members linked higher costs to rising fuel and raw material bills. The rate of input price inflation was moderate overall but remained below the historical average.

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Purchasing Prices

October survey data signaled an increase in average prices paid for input goods. The increase was solid and the fastest in six months. Furthermore, the latest rise extended the current phase of inflation to 17 months. Approximately 5% of firms noted an increase in purchase prices, compared with 1% that reported a reduction.

Staff Costs

Adjusted for seasonal influences, the Staff Costs Index registered above the critical 50.0 mark that delineates inflation from deflation, thereby signaling another increase in staff costs across the non-oil private sector. The rate of inflation slowed since September, however, and was fractional overall.

Quantity of Purchases                                            

Purchasing activity in the non-oil private sector increased at a faster pace in October. The latest expansion was sharp overall, above the historical average, and the strongest seen since February. Anecdotal evidence suggested companies increased input buying to meet rising output. Around 28% of panel respondents noted an increase in the latest survey.

Stock of Purchases

Pre-production inventories increased for the second month running during October. The rate of growth was modest overall and the strongest seen in four months. Nonetheless, the latest expansion was well below the historical average. Around 7% of firms reported higher stocks of purchases, compared with 2% that noted a reduction.

Future Output                                                                                         

Business confidence towards future growth prospects reached a record high in October. Promotional activity, investment surrounding Expo 2020 and new product launches were all linked to the increase in optimism in the latest survey period. Approximately 78% of firms forecast an increase in output over the next year, compared with 3% that expressed pessimism.