The UAE’s non-oil private sector improved at the fastest rate in four months on May, recording a sharp growth in both output and new orders, according to Emirates NBD’s seasonally adjusted purchasing manager’s index (PMI).
According to the report, the strong performance of UAE’s non-oil private sector is a result of sharp improvements in business conditions, above the long-run average of the series.
The PMI has been in shown growth continuously since September 2009.
The expansion in out recorded in May matched that recorded in January, with many respondents noting a strong level of demand from both domestic and external sources.
The index showed that new export orders increased at the fastest pace since November 2015, with companies frequently noting improved demand from other countries in the GCC.
Additionally, the results showed a strong increase in new project wins and developments, largely related to the upcoming Expo 2020 event in Dubai.
As a result of rising output requirements, many firms reported hiring additional staff at the fastest rate recorded in four months.
This growth, however, was slight overall and below the long-run average, with some firms reporting falling employment levels due to cost optimisation.
As far as prices, firms reported a reduced level of input cost inflation in May, with softer staff costs and purchase price inflation contributing to only a modest increase in operating costs.
Promotional activity was reported in the most recent survey, as reflected by a significant decrease in output charges.
May data signalled a continuation of increasing backlogs in non-oil sectors, bringing the build-up to a length of 17 months. Many respondents linked higher levels of work outstanding strong inflows of new business.
Stocks of input goods rose in the May survey. Anecdotal evidence suggests companies acquired additional stockpiles of goods in anticipation of rising output requirements.
“The strong PMI reading in May was partly due to a rebound in export orders, reflecting improved external demand conditions as well as a significant price discounting domestically,” said Khatija Haque, head of MENA research at Emirates NBD. “As a result, while the headline index shows strength in activity, profit margins remain under pressure.”
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