Job creation is the biggest challenge for UAE private sector, says bank

Business conditions for non-oil private sector firms improved in April
By Parag Deulgaonkar
Wed 03 May 2017 09:33 AM

UAE non-oil private sector firms reported steady growth in April but pace of job creation remained modest, according to Emirates NBD.

Its purchasing managers’ index – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – remained stable at 56.1 last month, from 56.2 in March – signalling a “sharp” improvement in the health of the sector.

“The index remained little changed in April from March, at both a headline level [average of 54.5] and in terms of the detail. The index shows that while overall activity was firm going into the second quarter, companies are still facing significant challenges as job creation remains subdued and pricing power is limited,” said bank’s head of research and chief economist Tim Fox.

However, sharp expansion of output supported a 26-month high growth of the non-oil private sector though the rate softened from March, driven by new projects, stronger underlying demand and favourable economic conditions.

New order book volumes rose at a sharp pace, despite growth easing to a four-month low. Marketing initiatives, good quality products and construction work contributed to further improvements in demand with new export orders rising for the fifth month in succession.

Private companies continued to hire with their payroll numbers rising for the 12th month in a row driven by increased output requirements. The rate of job creation, however, was modest and below the series average.

Meanwhile, purchasing activity registered sharp growth, thanks to a record high growth in the pace of pre-production inventory accumulation, as companies continued to build stocks due to projections of further improvements in demand.

Non-oil private sector firms blamed an increase in market prices for raw materials and higher demand for inputs for higher cost burdens.

On the other hand, firms reduced output charges at a modest pace, the first fall in three months, with intensive competition forcing them to offer discounts to attract customers, the bank said.

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