Private sector growth, jobs hit new lows in major Gulf economies
Non-oil private sector growth in the Gulf’s major economies eased in October on the back of subdued demand and declining new works. The weakening growth has taken job creation to new levels near stagnation in UAE and Saudi Arabia.
Client demand muted in UAE
In the UAE, private sector lost further growth momentum for straight third month, with business conditions improving to the least extent in six months, according to a monthly survey by Emirates NBD bank.
The seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI) dropped for the third month in a row during October to 53.3, down from 54.1 in the previous month. It was also the lowest reading since April and below the long-run series average of 54.5.
The survey said a relatively subdued rise in new work was mainly to blame for the overall slowdown.
“Output continued to rise sharply regardless, although the rate of expansion slowed marginally to a four-month low. Meanwhile, a combination of subdued demand and ongoing competitive pressures led firms to cut their charges for the twelfth straight month. Purchase costs increased following September’s decline, albeit only modestly,” the survey noted.
The emirates saw a negligible rise in employment with no change from September levels. The near-stagnation of staffing levels also a key factor behind the sluggish growth in the private sector.
As client demand remained muted, purchasing activity rose at a weaker pace.
“Although the headline PMI index declined in October, output growth remains very strong. However export orders declined for the fourth consecutive month, contributing to a slowdown in total new orders growth since the summer,” said Khatija Haque, Head of MENA Research at Emirates NBD.
“Overall, growth momentum appears to have eased at the start of Q4 after a relatively strong Q3, but the data still points to solid expansion in the UAE’s non-oil private sector in October,” she added.
Employment hits six-month low in Saudi
Business conditions in the kingdom’s non-oil private sector improved at the weakest pace since August 2009 when the survey was launched.
Both output and new orders rose more slowly, while jobs growth neared stagnation with rate of hiring easing to a six-month low. Among those surveyed, 97 per cent companies reported no change in employment levels since September. Those firms that took on extra staff did so in an effort to expand operating capacity.
The seasonally adjusted Saudi PMI dropped to a survey-record low of 53.2 in October, from 55.3 in September. That marked a second successive slowdown in growth following August’s 12-month high of 56.6. The average index reading of 2016 to date, 54.7, remained much lower than the long-run trend of 58.4.
“The rate of expansion in purchasing activity held up slightly better, as firms acted on forecasts of stronger sales growth. Those projections may have been linked to an expected upturn in demand following price discounting. Charges fell for the second successive month amid muted cost pressures,” the survey said.
Haque said the decline in the PMI in October was not unexpected, given the additional fiscal measures that came into effect last month including public sector wage cuts. External demand also softened further last month.
“However, the PMI reading remains well above the neutral 50.0 level, indicating growth in the non-oil sector, albeit at a slower rate than last year,” she added.