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Sun 5 Feb 2017 02:44 PM

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UAE non-oil sector growth reaches highest level since July

But latest Emirates NBD tracker suggests mounting cost pressures on firms

UAE non-oil sector growth reaches highest level since July
(KARIM SAHIB/AFP/Getty Images)

The UAE’s non-oil sector growth posted its highest reading since July 2016 in Emirates NBD’s latest index, spurred by an increase in new business and foreign client demand.

Emirates NBD’s seasonally adjusted UAE Purchasing Managers’ Index signalled a “notable improvement” in the health of the sector, rising from 55.0 points in December to 55.3 points in January, the bank said.

The upward movement in the index was driven by a sharper increase in new work during January, with new business rising at the quickest rate in 16 months.

The report said anecdotal evidence had pointed to an uptick in promotional activities, client demand and economic conditions, resulting in new business inflows. Meanwhile, growth of new export orders also rose to a 14-month high, the bank said.

Levels of output and new work also improved supported by rising foreign demand, according to the tracker, prompting companies to increase employees as per payroll numbers for the ninth consecutive month.

The rate of backlog accumulation was slight as the vast majority (91 percent) of monitored firms recorded no change in work-in-hand.

The tracker is a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy.

Khatija Haque, head of MENA research at Emirates NBD, said: “The January PMI data shows that output and new order growth remains strong, and the improvement in export demand last month is particularly welcome after a relatively soft 2016.”

The data includes responses from a survey of non-oil business conditions produced in collaboration with IHS Markit. It found that firms continued to cut their prices despite a rise in cost burdens, and also highlighted mounting cost pressures on businesses and sharp input price inflation driven by a rise in purchasing prices.

That said, output charges decreased for the fifteenth consecutive month in January, with a number of companies citing intense market competition. However, the pace of reduction was slight overall and the weakest seen in five months.

Average lead times improved “at a sharp rate broadly in line with that registered in the previous month”.