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Wednesday, 4 July 2018

PMI sees business conditions in non-oil private sector improving only slightly last month

Business conditions in the non-oil private sector appear to have improved only slightly last month, “signalling a deterioration in [its] health,” according to the Emirates NBD PMI reading (pdf) compiled by Markit. The gauge rose slightly 49.4 in June from 49.2 in May, driven by a slight drop in output and exports, as “ both total new orders and export orders decreased to lesser extents than observed in May.” The PMI remains below the 50.0 mark separating contraction from growth.

Still, businesses are confident about growth prospects for what remains of the year. Activity likely declined in June as a result of inflationary pressures and higher costs, which led many firms in the sector to hike prices. Despite that, the “degree of optimism strengthened from May, underpinned by expectations of further investments and new contracts.” Emirates NBD MENA Economist Daniel Richards also said that “external rebalancing and government investment” have now become crucial for growth, as the private sector “continues to lag.” Bloomberg is taking note of the story in light of the IMF’s recommendation that the CBE maintain monetary tightening in its third review.

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