Business activity growth in UAE’s private sector touches 25-month high

Business activity was led by new projects, a further general improvement in economic conditions and market demand

The UAE’s non-oil private sector registered strong growth in March, in line with the trend so far this year, according to Emirates NBD’s monthly survey.

Growth in the sector was led by expansion in business activity, which touched a 25-month high, the seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index found.

New projects, a further general improvement in economic conditions and market demand were reported as factors behind output growth, a report said.

The headline index, which reached a 19-month high of 56.2 in March, from 56 in February, was also supported by sharper increases new orders, and a record rise in stocks of purchases.

The growth in new order book volumes also hit a 19-month high, backed by more construction activity, good quality products and promotional activities, according to anecdotal evidence. New export business also expanded in March.

Meanwhile higher new order intakes prompted firms to scale up buying levels. The rate of expansion was the most marked in over one-and-a-half years, the report said.

The rate of inventory accumulation also accelerated to a survey-record high, with respondents revealing expectations of further improvements in client demand.

In terms of hiring, in line with increased output requirements, firms increased their staffing levels.

However, the rate of job creation was only modest, the report said. The rate of backlog accumulation edged up to a six-month high with companies reporting that higher demand had contributed to rising work outstanding.

The survey also found that firms faced increased cost pressures amid a general rise in market prices due to higher demand for raw materials, according to anecdotal evidence.

While the rate of overall input price inflation quickened in March, firms registered no change in output prices. Companies that raised charges passed on higher cost burdens to clients, while other firms reportedly offered discounts due to intense market competition.

Overall, the quarterly average of the index for the first quarter of 2017 stood at 55.8, the strongest in one-and-a-half years.

Tim Fox, head of Research and chief economist at Emirates NBD, said: “The latest PMI survey for the UAE points to encouraging growth in the non-oil economy through the first quarter of 2017. What was particularly notable in this report was the degree of optimism among local firms about the potential for further improvements in client demand, which was evident in a strong rise in purchasing activity.”