UAE’s private sector growth at the highest level since October 2014, hiring stagnant

Growth in the UAE’s non-oil private sector rose to the highest level since October 2014 in May, according to Emirates NBD’s monthly survey.

The seasonally adjusted Emirates NBD Purchasing Managers’ Index (PMI) rose to 59.4 in May from 57.6 in April.

This was the third successive monthly increase in the index, with the latest reading signalling a substantial improvement in business conditions, a statement said.

A “record rise” in business activity was recorded in May as the rate of expansion accelerated sharply from the previous month, the report found.

Stronger market demand, marketing activity and the start of new projects all reportedly contributed to the increase.

Companies largely expect growth to continue over the coming year, with business optimism only fractionally weaker than the previous month’s record high.

Meanwhile the rate of growth in new business also quickened, and was at a near-record pace. Along with improving demand, companies indicated that price discounting helped them to secure new orders.

New export orders rose at the fastest pace in the near 10-year survey history, with new business from Saudi Arabia and Oman.

The price discounting was reflected in an eighth consecutive monthly reduction in output prices. Companies were able to lower charges due to muted cost inflation. Overall input prices rose only marginally in May, and at the slowest pace in nine months, the report stated.

Higher new orders led companies to increase their purchasing activity, with positive expectations regarding future workloads encouraging stock building. Inventories of purchases rose to the greatest extent since March 2018.

Although both new orders and business activity increased at substantial rates in May, non-oil companies again displayed a reluctance to hire additional staff.

“Employment was broadly unchanged during the month, with almost all respondents leaving their staffing levels stable,” the report stated.

Khatija Haque, head of MENA Research at Emirates NBD, said: “While the rise in the headline PMI indicates faster GDP growth in the UAE’s non-oil private sector, the environment remains a challenging one for businesses.

“The strong rise in both output and new orders last month was on the back of continued price discounting by firms as well as stronger growth in export orders. Moreover, when the headline PMI was last at a similar level (in October 2014 and January 2015) the survey showed solid growth in private sector jobs, which is not the case this time.

“The employment index in May 2019 was only fractionally above the “no-change” level and wages were stagnant as well, so the sharp rise in the volume of business activity is not yet benefitting households,” she added.