UAE’s private sector sees steep drop in export orders in July

The UAE’s non-oil private sector saw strong growth in the month of July, spurred by increased output and new work, according to Emirates NBD’s monthly survey.

The seasonally adjusted UAE Purchasing Managers’ Index (PMI) rose to a three-month high of 56 in July from 55.8 in June.

However, new export orders fell for the second consecutive month, and at the quickest pace in the history of the survey, the report stated. The rate of contraction was sharp overall, with the respective index falling to a record low, it added.

In contrast, a sharp rise in overall new orders was seen in July, although growth eased slightly from June. According to anecdotal evidence, promotional activities underpinned improvements in client demand, the survey found.

The private sector also registered an increase in output, with panellists attributing improved business activity to a combination of more projects and favourable economic conditions.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The PMI survey in July showed that domestic demand remained robust, offsetting weakness in external demand last month. Firms were more optimistic about the coming year, and increased inventories at a record rate, partly in anticipation of further order growth.”

In response to greater output requirements, firms scaled up inventories and employment.

Hence inventories held by firms operating in the UAE rose at a record pace. In part, the increase in stocks of purchases reflected positive expectations of further improvements in market demand.

Meanwhile, while firms increased their payroll numbers, the rise in employment was only marginal, the report added.

On the price front, average input costs rose for the second consecutive month and inflation was solid.

According to underlying data, higher cost burdens stemmed from greater purchasing prices and staff costs. Survey respondents also highlighted a general increase in raw materials prices.

Looking ahead, companies expressed “optimistic projections” for output over the coming 12 months.

Business confidence remains strong because of orders in the pipeline and forecasts of further improvements in demand conditions.