UAE’s private sector sees ‘sharpest improvement’ since Dec 2017

The UAE’s non-oil private sector saw an “improvement” in business conditions in April, although hiring remain dull, according to the latest monthly report by Emirates NBD.

The headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI) rose for the second month running in April, hitting 57.6 from 55.7 in March.

The reading signalled a sharp monthly improvement in business conditions, and one that was the greatest since December 2017, the report said.

A “sharp acceleration” was recorded in the rate of new order growth at UAE non-oil companies, with the pace of expansion at a 16-month high due to improvements in market conditions.

External demand also picked up markedly as new work from Saudi Arabia and Oman in particular pushed the rate of growth in new export orders to a near four-year high, the report stated.

Higher new orders combined with a number of ongoing projects led to a “substantial rise” in business activity in April. The rate of expansion was the fastest since January 2015.

Some survey respondents reported that promotional efforts had helped to boost activity.

However, discounts to customers led to a seventh successive monthly fall in output prices.

Companies were able to reduce charges thanks to a relative lack of cost inflationary pressures. Both purchase prices and staff costs rose only marginally in April.

The report also found that hiring remained stagnant.

“As part of efforts to limit cost inflation, staffing levels were raised only slightly again at the start of the second quarter, despite strong increases in workloads.”

A combination of sharp new order growth and relatively weak hiring led backlogs of work to rise at a faster pace.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The improvement in the volume of activity and new order growth last month is encouraging. However, with firms still competing on price, there is still a reluctance to boost hiring and we haven’t seen a meaningful improvement in job growth.

“Household consumption is likely to remain constrained in the absence of job and/ or wage growth.”

The report also found that business confidence was the highest since the series began seven years ago during April, as expectations of higher new orders supported optimism in the 12-month outlook for activity.

Around 82 per cent of respondents also predicted a rise in output over the coming year.