UAE’s non-oil private sector still facing challenges

Job creation remains subdued and pricing power is limited, finds monthly Emirates NBD survey



UAE’s non-oil private sector recorded flat growth in April, compared to the previous month, according to the latest monthly survey by Emirates NBD.

The seasonally adjusted UAE Purchasing Managers’ Index (PMI) indicated that business conditions across non-oil private sector firms in UAE continued to improve at the start of the second quarter.

The PMI stood at 56.1 in April, down marginally from 56.2 at the end of the first quarter in March – which was a 19-month high. The headline index remained stronger than the series long-run average of 54.5.

Tim Fox, head of Research and chief economist at Emirates NBD, said: “The UAE PMI remained little changed in April from March, at both a headline level and in terms of the detail.

“The PMI shows that while overall activity was firm going into the second quarter, companies are still facing significant challenges as job creation remains subdued and pricing power is limited.”

In terms of output, the survey found that although the rate of growth softened since March, it was the second-sharpest in 26 months.

Panellists attributed the growth to new projects, stronger underlying demand and favourable economic conditions.

Meanwhile, new order book volumes also rose, although growth eased to a four-month low.

“Marketing initiatives, good quality products and construction work contributed to further improvements in market demand, according to respondents,” the report stated.

New export orders rose for the fifth month in succession, although at a much slower pace than that seen for total new orders.

Firms increased their payroll numbers for the 12th month in a row, in response to increased output requirements.

However, the rate of job creation remained modest and below the series average. As a result, backlogs accumulated for the fourth month in succession.

The survey also recorded sharp growth of purchasing activity, because of which the pace of pre-production inventory accumulation climbed to a record high, as panellists continued to build stocks due to projections of further improvements in demand.

Non-oil private sector firms operating in UAE faced divergent price trends at the start of the second quarter, the report pointed out.

Firms that reported higher cost burdens blamed a general increase in market prices for raw materials and higher demand for inputs. The rate of inflation was solid and only slightly slower than the preceding month.

Firms also reduced output charges at a modest pace, the first fall in three months. There were reports that intensive competition led firms to offer discounts to attract customers.