Expansion of the UAE economy continues, but at a slower pace with decelerating prices

  • UAE’s PMI (Purchasing Managers’ Index) data indicates that there is a surge in the employment levels although marginally for the fifth consecutive month.
  • The overall business activity in the UAE’s private (non-oil) economy continues to surge ahead than other emerging markets, and with ever expansion in the account of new orders, but at a slower pace as witnessed in the previous few months.

During July, IHS Markit’s seasonally-adjusted UAE Purchasing Managers’ Index stood at 55.1, slightly reduced than that of the 57.7 as recorded in June, last month. However, it was a still placed firmly in a very well-balanced positive territory as any reading which is above 50 ratings is indicative of positive economic expansion.

This positive surge recorded despite a slump in prices and slower pace is rooted upon higher sales activity as well the rise in the employment levels which has surged ahead marginally in tandem for the fifth consecutive month.

In terms of a better outlook, IHS Markit stated that over the coming 12 months, market conditions would witness better growth and stabilizing condition, higher rates of new orders and Expo 2020-related activity that are all expected to support a massive surge in business activity.

Andrew Harker, the Associate Director of IHS and author of this report also stated that “leading corporates were partly subservient on the prices discounting newer orders, and suggesting a certain weakness in underlying demand, that was, in turn, supported amply by a lack of cost inflation in July”.

Though the pace of decline in the output prices that continued to witness downward trend for the tenth consecutive month was termed as “modest”, input costs draw mostly flat pattern, as there was no surge reported either in purchase prices or the staff costs.

As stated by the Central Bank of the UAE in June, the UAE economy witnessed a total growth of an annual 2.2 percent from an year earlier during the first three months as seen this year mainly on the performance of the private (Non-oil) sector that continued to gain momentum on back of the vast government spending as it grew 1.6 percent in the three months to the end of March from the same period a year earlier.

In May, the Central Bank of the UAE revised down its overall 2019 economic growth forecast to 2 percent from 3.5 percent, as Opec’s third-largest producer reported reduced output and therefore the international economy continued to lag down thanks to the escalated trade tension between the U.S.A. and China. The UAE economy, the Arab world’s second-largest, accelerated to 1.7 percent from the previous year.