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Wednesday, 5 September 2018

Business conditions improve again in August as PMI advances to its highest level since 2015

** #3 Business conditions improve again in August –PMI: Business conditions continued to improve in August, with the headline Emirates NBD PMI compiled by Markit rising to its highest level since September 2015. The index rose to 50.5 in August, up from 50.3 in July, as a result of “new orders rising for the second consecutive month” from both domestic and international markets, according to the report. August also saw output stabilizing, “ending a three-month period of contraction.” Staffing levels also rose, sending employment growth rates up to their highest levels since 2011.

Looking ahead with cautious optimism: Positive sentiment is at its weakest levels since 2016, as growth in August was softer than in July, with inflation levels still high largely as the result of higher purchase costs. The PMI in July had crossed the 50.0 mark that separates contraction from growth, rising from 49.4 in June. The market remains widely optimistic about the 12 months ahead, but is also aware of that a slowdown is a possibility in light of high prices. Read the full report here (pdf).

Worst of inflation behind us? The improvement in the PMI suggests that the private sector is moving toward sustainable recovery and that it was able to absorb the inflation from the latest round of subsidy cuts, EFG Hermes economist Mohamed Abu Basha told Hona Al Asema. With the economy now proven able to absorb inflation, Abu Basha says the central bank could look at an interest rate cut this year (watch, runtime: 7:53).

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