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Wed 3 Jul 2019 02:18 PM

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UAE private sector growth climbs to near 5-year high in Q2

Emirates NBD PMI reading is the highest since the fourth quarter of 2014, driven by output, new orders

UAE private sector growth climbs to near 5-year high in Q2

Growth in the UAE's non-oil private sector rose to its highest quarterly level for nearly five years during the second quarter of 2019, according to new research.

The Emirates NBD Purchasing Managers’ Index (PMI) reading for Q2 was the highest since the fourth quarter of 2014 as firms reported growth in output and new orders on the back of further price discounting.

Khatija Haque, head of MENA Research at Emirates NBD, said:
“The recent PMI surveys indicate that growth in the UAE’s private sector has accelerated in Q2... While firms have reported growth in output and new orders, this has come on the back of further price discounting. As a result, there has been no real boost to hiring as businesses remain focused on keeping costs down.”

The headline seasonally adjusted PMI posted 57.7 in June, down from 59.4 in May but still signalling a marked monthly improvement in business conditions in the UAE’s non-oil private sector.

June data pointed to a sharp expansion of business activity, and one that was only slightly weaker than May’s survey record. Marketing activities were often reported as being behind the increase in overall activity, while economic conditions were also signalled as having improved.

A similar picture was seen with regards to new orders, with growth remaining substantial despite softening from the previous month. A number of panellists reported that competitive pricing had enabled them to secure sales, and this was reflected in a ninth consecutive monthly decrease in output prices.

Companies were able to offer discounts thanks to a lack of cost inflationary pressure. Overall input prices rose only marginally in June. Purchase costs increased slightly, while wages and salaries were broadly unchanged.

The recent trend of only marginal changes in workforce numbers continued in June, with almost all respondents seeing no change in employment during the month.

Purchasing activity grew at a record pace for the second month running as companies responded to rising new orders. Stocks of purchases also increased, albeit at a reduced pace that was the softest since February.

The survey showed that non-oil companies remained strongly optimistic that business activity will increase over the coming year, although sentiment eased again from April’s record high.
Expectations of further new order growth was a key factor behind optimism, while next year’s Expo 2020 was also widely mentioned.