Economic sentiment in the UAE dipped in September as a slowdown in global growth put pressure on domestic businesses.
The UAE purchasing managers’ index (PMI), a measure of business activity in the non-oil private sector, reported that business conditions last month improved at the weakest pace since June.
The Emirates NBD-sponsored index, which covers manufacturing and services, slipped to 54.1, down from 54.7 in August. A figure above 50 means businesses in the country are expanding, while below 50 signals a contraction.
The index, which is regarded as one of the earliest indicators of an economy’s performance, registered a much slower increase in the amount of new work reported than it had for the past six Septembers in the country. The level of job creation was also more modest than usual for the time of year.
The figure was also broadly in line with the average so far this year (53.8), albeit noticeably lower than 2014 (58.1) and 2015 (56.0) averages.
However, data company IHS Markit, which compiles the index, reported that numbers for both output and purchasing rose sharply during the month, suggesting that firms remain confident about the near-term outlook.
“The sharp slowdown in new order growth last month appears to be due to weaker demand from external markets rather than soft domestic demand,” said Khatija Haque, head of Mena research at Emirates NBD.
According to the index, which is based on replies to questionnaires sent to purchasing executives at about 400 UAE companies, managers reported that the number of new businesses fell sharply in September as export numbers fell.
Since the end of 2014, the UAE economy has suffered from an oil price freefall, which was US$52 per barrel on Wednesday, from more than $115 per barrel in June that year, prompting cuts in public spending and falling consumer demand.
The rate of growth also slowed in Saudi Arabia last month, according to the Emirates NBD Saudi Arabia Purchasing Managers’ Index.
Growth in Saudi Arabia’s non-oil private sector slowed, falling to 55.3 in September from 56.6 in August after austerity measures imposed by the Saudi government to help reduce the country’s spiralling deficit took their toll on businesses.
“Saudi Arabia’s PMI eased only slightly in September, on weaker new order growth. However, the average PMI for the third quarter of 2016 points to a faster rate of expansion in economic activity compared to the first half of this year,” said Ms Haque.
“Recent announcements on spending cuts in the kingdom are likely to weigh on household consumption and consumer confidence however, as we head into the fourth quarter.”