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Fri 10 Jun 2016 12:04 AM

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UAE private sector growth regains momentum in May

New business survey also highlight underlying fragility in economy including employment growth

UAE private sector growth regains momentum in May

The upturn in the UAE’s non-oil private sector regained some momentum midway through the second quarter, thanks mainly to a sharp expansion of output, according to a new business survey.

Data from the Emirates NBD UAE Purchasing Managers’ Index (PMI) showed that activity increased at the fastest pace in eight months during May, helped by a pick-up in new business growth.

However, it also pointed to areas of underlying fragility, as both employment and input buying rose only slightly. The expansion of the latter was the least marked since September 2011.

Cost pressures intensified but remained historically subdued, while output prices fell for the seventh month running.

Adjusted for seasonal influences, the headline Emirates NBD UAE PMI posted 54.0 in May, up from 52.8 in April. The latest figure was the second-highest in six months, albeit still below the long-run series average (54.5).

Khatija Haque, head of MENA Research at Emirates NBD, said: “The improvement in the UAE PMI was mainly due to strong growth in output last month, with new business picking up as well. This confirms our view that the non-oil sector of the UAE is continuing to expand, albeit at a slower rate than last year.” 

According to the survey, the overall improvement in the health of the sector was driven by higher output in May. The rate of expansion was the quickest since last September, with panellists commenting on new work generated by marketing initiatives.

Data confirmed that new orders had risen solidly in May. Growth was faster than in April, but remained much slower than the survey average. Contributing to the relative weakness of total new work was a negligible rise in exports. Despite signalling an increase for the first time in three months, the respective index posted one of its lowest readings since the series began in 2009.

Employment remained an area of concern in May. While job creation resumed following a stagnation in April, the rate of hiring was marginal and among the weakest seen in nearly seven years of data collection. Incoming new projects therefore placed pressure on operating capacity, though backlogs rose only slightly.