UAE non-oil private sector growth hits 34-month high

The UAE reached a nearly three-year high for non-oil private sector growth during December, according to Emirates NBD.

The Dubai Bank’s purchasing managers’ index, produced by IHS Markit, showed business conditions improving at the sharpest pace since February 2015 with steep expansion in output and new orders and strong export demand growth.

This meant the headline PMI score rose from 57.0 to 57.7. A score of above 50 indicates growth and less than 50 a decline in the sector.

Head of MENA research at Emirates NBD, Khatija Haque, said the introduction of a 5 per cent value added tax rate on January 1 likely spurred activity in the fourth quarter of 2017.

Read: VAT will help wean UAE off oil, says official

“Nevertheless, employment and wage growth has been relatively muted, not just in December but for 2017 as a whole,” she added.

Output eased from a 33-month high in November but there was a 35-month high in new order growth thanks in part to strong underlying demand and new business from government sources.

New export orders also expanded after contracting the previous month and reached a nine-month high. Emirates NBD suggested this was due to demand from neighbouring GCC countries.

Firms continued to hire new staff to meeting rising output requirements but hiring, as before, remained subdued.

Read: UAE private sector growth accelerates but job market remains muted

Input prices continued to increase, but output charges fell as companies reduced selling prices to stimulate demand.

Meanwhile, companies operating in the UAE’s non-oil private sector increased their purchasing volumes in an anticipation of an upturn in output demand.