Almost ‘no job growth or increase in wages’ in UAE’s private sector

The UAE’s non-oil private sector improved at the fastest pace so far this year in June, backed by strong inflows of new business and output growth, according to Emirates NBD’s monthly survey.

The seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI) rose to 57.1 in June, up from 56.5 in May. The reading was the strongest in 2018 so far and above the series’ historical average (54.7).

However, job creation remained slow during the month.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The headline PMI rose to a 2018-high in June, reflecting a sharp increase in both export and domestic new orders as well as output.

“In spite of this strengthening demand, there was almost no job growth or increase in wages in the UAE’s private sector last month, as firms continued to focus on efficiency and cost containment.”

Output growth across the non-oil private sector accelerated to a seven-month high during June’s survey. According to anecdotal evidence, higher business activity was associated with strong inflows of new work.

Rising output has been recorded continuously since February 2010.

Promotional activity, business investment and growing client demand from both domestic and export markets led to expansion of new order books. The rate of growth was the strongest in the year-to-date.

Backlogs of work also increased at a record pace in June.

However, purchasing activity growth eased to a two-year low in June, with stocks of purchases increasing at the slowest pace in 25 months.

Some firms noted that they had looked to streamline operations.

On the price front, average cost burdens faced by non-oil private sector companies increased at a slower pace in June.

The rate of input price inflation was only slight overall and the weakest in three months, the report stated.

Reducing staff cost and raw material price inflation contributed to lower overall input cost inflation in June.

Price discounting also continued for the second month running, although to a softer extent compared to May, the report added.

Overall, business confidence hit a fresh-survey high in June. According to anecdotal evidence, business investment, marketing initiatives and an anticipated economic upturn led to positive sentiment, the report added.

Earlier this year, the UAE’s central bank revealed that non-oil economic activity in the country grew by 3.1 per cent year-on-year in the first quarter of 2018.

The central bank also raised its forecast for gross domestic product growth in 2018 to 2.7 per cent from its previous forecast of 2.5 per cent.

More specifically, the bank improved its prediction for the UAE’s non-oil GDP growth to 3.9 per cent from 3.6 per cent, citing better prospects for the global economy.

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