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Sun 5 May 2019 09:30 AM

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UAE's non-oil business activity grew sharply in April

The pace of expansion of non-oil sector firms rose to a 16-month high

UAE's non-oil business activity grew sharply in April
Higher new orders combined with a number of ongoing projects led to a significant rise in business activity, with the rate of expansion the fastest since January 2015.

There was a sharp acceleration in the growth of UAE non-oil companies in April, driven by improvements in market conditions and a growth in external demand, according to the seasonally adjusted Emirates NBD Purchasing Managers Index (PMI).

According to the data, the pace of expansion of growth in non-oil companies was a 16-month high, with new work from Saudi Arabia and Oman in particular pushing the rate of growth of new export orders to an almost four-year high.

Higher new orders combined with a number of ongoing projects led to a significant rise in business activity, with the rate of expansion the fastest since January 2015. Emirates NBD said some panellists reported that promotional offers over the course of the month had also helped boost activity.

Additionally, the offer of discounts to customers led to a monthly fall in output prices for the seventh consecutive month and at a more marked rate than seen in March.

New order growth

Many companies reported that they were able to reduce charges partly because of a lack of cost inflationary pressures. Both purchase prices and staff costs rose only marginally in April.

To limit cost inflation, staffing levels went up only slightly at the start of the second quarter, despite the significant increases in workloads. Sharp new order growth and limited hiring led backlogs of work to rise at a more substantial pace.

Business confidence was the highest since the series began seven years ago during April, bolstered by expectations of higher new orders and a positive 12-month outlook for activity. Approximately 82 percent of Emirates NBD’s panellists predicted a rise in output over the coming year.

Purchasing activity continued to rise sharply, while stocks of purchases accumulated to the greatest extent since March 2018.

Competing on price

Despite strong demand for inputs, suppliers’ delivery times shortened as vendors responded to requirements for fast deliveries.

“The improvement in the volume of activity and new order growth last month is encouraging,” said Khatija Haque, head of MENA research at Emirates NBD.

“However, with firms still competing on price, there is still a reluctance to boost hiring and we haven’t seen a meaningful improvement in job growth.

”Household consumption is likely to remain constrained in the absence of job and/or wage growth,” Haque added.