Non-oil sectors expand in UAE and Saudi Arabia

9 June 2016

The UAE and Saudi Arabia’s efforts to diversify their economies away from oil appear to be bearing fruit as figures show an upturn in the non-oil private sector in May in both countries.

Emirates NBD Bank’s Purchasing Managers’ Index (PMI) said thanks mainly to a sharp expansion of output and a pickup in new business growth, non-oil business activity in the UAE increased at the fastest pace in eight months during May.

The bank warned of areas of underlying fragility as employment rose only slightly and input buying expanded at the slowest rate since September 2011.

Cost pressures intensified but remained subdued while output prices fell for the seventh month running.  

Khatija Haque, head of MENA research at Emirates NBD, said: “The improvement in the UAE PMI was mainly due to strong growth in output last month, with new business picking up as well.

“This confirms our view that the non-oil sector of the UAE is continuing to expand, albeit at a slower rate than last year.”  

Much of the new work in May had been generated by marketing initiatives, respondents said. In spite of this new business growth of purchasing activity slowed in May.

A separate PMI found business conditions in Saudi Arabia’s non-oil private sector had improved in May to the greatest extent since last November.

Both output and new orders rose sharply, with the latter rising more quickly than at any time in the last five-months.

Companies raised their input buying at a faster pace though, as in the UAE, employment increased only modestly.

Meanwhile, the bank’s Egypt PMI indicated the downturn in Egypt’s non-oil private sector was sustained for an eighth successive month in May. However, the speed at which business conditions are worsening – partly due to the weakness of the Egyptian pound against the dollar – appears to be slowing.

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