Job creation in UAE’s private sector slows to eight-month low

Job creation has stagnated in the UAE’s non-oil private sector despite growth in business activity, according to Emirates NBD’s monthly survey.

The seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI) rose from May’s six-month low of 54.3 to 55.8 in June, supported by sharper rises in both new orders and output.

The latest reading signalled a “sharp improvement in the health” of the private sector, with the rate of growth stronger than the long-run series average (54.5), the report said.

However, the rate of job creation eased to an eight-month low to signal a “broad stagnation” in employment, it found.

New export orders also fell for the first time in seven months as demand from international markets reduced.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The rise in output and new orders in June is encouraging, although we note that firms continued to reduce selling prices on average in order to support demand and order growth.

“The survey also highlights the lack of employment growth despite strong the strong increase in new work last month. Overall however, the PMI data for H1 2017 supports our view that the non-oil sectors have grown at a faster pace relative to H1 2016.”

The general improvement in operating conditions was closely linked to a sharper increase in output during June from May’s 13-month low, the report found.

The combination of more projects, trends in new orders and favourable economic conditions was reported to have contributed to greater business activity by survey respondents.

Also, growth in new orders quickened from May’s five-month low to the fastest pace since August 2015. Firms linked the rise in new business to discounts and greater marketing efforts.

In response to greater output requirements, companies raised purchasing activity, in turn also causing inventories to rise.

Firms said forecasts of greater new work was the key reason behind the latest rise in inventories.

On the costs side, input prices rose following a decline in May, mainly driven higher by a general increase in market prices for raw materials. In spite of increased cost pressures, firms continued to offer discounts amid reports of intense competition.

Looking ahead, business confidence towards the 12-month outlook eased to the second-lowest in the survey’s history. However, firms expect that projects in the pipeline and further improvements in economic conditions will lead to output growth in the year ahead.