UAE private sector growth momentum maintained in August

New survey says business conditions improved solidly, supported by sharp rises in output and new work
By Staff writer
Sun 11 Sep 2016 05:14 PM

The strong performance of the UAE’s non-oil private sector recorded at the start of the third quarter was largely maintained in August, according to a new business survey.

Data from the Emirates NBD UAE Purchasing Managers’ Index (PMI) showed business conditions improved solidly, supported by sharp rises in output and new work. The respective rates of expansion held broadly steady following July’s recent highs.

The health of the sector was reflected by further growth of employment and purchasing activity, with the latter picking up to a nine-month high.

Meanwhile, charges continued to fall, but only slightly as the impact of higher input costs nearly matched that of competitive pressures.

After having risen to a ten-month high of 55.3 in July, the headline seasonally adjusted Emirates NBD UAE PMI signalled another month of solid growth in August. At 54.7, the index was down fractionally but still above the overall series average (54.5).

Notably, the latest improvement in business conditions was stronger than those seen during the first half of the year.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The slight decline in the August PMI reading is not unexpected given the strong July number.  Output and employment appeared to be the main reasons for the slower rate of expansion last month, coming off the highs posted in July. 

"However, output continues to expand at a relatively fast pace and new order growth is also robust. The PMI data is consistent with our view of slower but solid economic growth in the UAE in 2016.” 

Underpinning growth of the non-oil private sector as a whole were sharp expansions of output and new work. Rates of increase eased since July, but remained faster than respective trends so far in 2016. As well as raising output to help with ongoing projects, panellists were buoyed by successful marketing and a general improvement in client demand.

The rise in total new work was centred on the domestic market, latest data showed. New export business fell for the second month in a row, and the fourth time since March. That said, the rate of decline was only modest.

Job creation was recorded higher for the fourth successive month in August. The rate of hiring was only slight, however, having slowed from July’s recent high. It was also insufficient to prevent a build up of backlogs of work, particularly with new orders rising at a marked pace.

Reflective of new business gains and higher output requirements, purchasing activity increased in August to a nine-month high, the survey said

August data also pointed to mounting cost pressures in the UAE’s non-oil private sector. Both salaries and purchasing costs rose to the greatest extent in 22 months. Higher costs were barely felt by clients, however. The intensity of competition ensured that the impact of rising input prices was limited, as charges fell for the tenth straight month.

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