UAE PMI climbs to 19-month high in Q1

Dubai / Emirates Business

The UAE Purchasing Managers’ Index™ (PMI™) — a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy — picked up to a 19-month high of 56.2 in March, from 56.0 in February.
Growth of the UAE non-oil private sector gained further momentum in March, continuing the trend observed throughout the opening quarter of 2017. The overall expansion was driven by sharper increases in output and new orders, as well as a record rise in stocks of purchases. Firms raised their payroll numbers slightly, while there was evidence of ongoing pressure on operating capacity. Prices data suggested that the UAE’s non-oil private sector faced intense market competition, as the vast majority of firms registered no change in output charges despite increased cost pressures.
The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.
Commenting on the Emirates NBD UAE PMITM, Tim Fox, Head of Research and Chief Economist at Emirates NBD, said: “The latest PMI survey for the UAE points to encouraging growth in the non-oil economy through the first quarter of 2017. What was particularly notable in this report was the degree of optimism among local firms about the potential for further improvements in client demand, which was evident in a strong rise in purchasing activity.” The reading was consistent with a sharp improvement in business conditions. As a result, the quarterly average for the first quarter of 2017 (55.8) was the strongest in one-and-a-half years.
The increase in the headline index was supported by sharper growth of business activity. In fact, the rate of expansion accelerated to the sharpest in 25 months. New projects, a further general improvement in economic conditions and market demand were reported as factors behind output growth.
At the same time, growth in new order book volumes quickened to a 19-month high and was sharp overall. According to anecdotal evidence, more construction activity, good quality products and promotional activities were behind the rise in new orders. New export business also expanded in March.
Reflective of increased output requirements, firms increased their staffing levels. However, the rate of job creation was only modest. Subsequently, the rate of backlog accumulation edged up to a six-month high. Companies reported that higher demand had contributed to rising work outstanding. Higher new order intakes prompted firms to scale up buying levels. In fact, the rate of expansion was the most marked in over one-and-a-half years. Subsequently, the rate of inventory accumulation accelerated to a survey-record high.