UAE non-oil sector up but job market still a concern

The UAE’s non-oil private sector has regained some momentum thanks to a sharp increase in output in May, but employment remains an area of concern, according to a survey by Emirates NBD and Markit

The Purchasing Managers’ Index, an indicator designed to give an overview of conditions in the sector, increased from 52.8 in April to 54.0 in May, its second-highest level in six months but still lower than the 54.4 long-run average.

This growth was driven by higher output, which expanded at its fastest rate since September. New orders also grew faster last month but remained slower than the survey average and there was a “negligible” rise in exports, with one of the lowest readings since 2009.

However, purchasing activity growth slowed to record its weakest increase for 56 months. The bank said some panellists indicated they had postponed buying due to sufficient stock levels to cope with demand.

Employment also remained a concern in May, following stagnation in job creation in April. The rate of hiring was described as “marginal and among the weakest seen in nearly seven years of data collection”. This lack of job creation also placed pressure on operating capacity for new projects.

Read: Stagnating job market hits UAE non-oil growth in April

“The improvement in the UAE PMI was mainly due to strong growth in output last month, with new business picking up as well. This confirms our view that the non-oil sector of the UAE is continuing to expand, albeit at a slower rate than last year,” said Emirates NBD head of MENA research Khatija Haque.

Total input costs rose further for the non-oil private sector last month and inflation increased to a seven-month high but was still muted in a historical context. Charges also decreased for the seventh consecutive month due to greater competition.