UAE’s non-oil private sector growth improves in June

Dubai / Emirates Business

The state of the UAE’s non-oil private sector improved to the greatest extent in the year-to-date, buoyed by strong inflows of new business and output growth. Promotional activity helped to stimulate client demand, reflected by new order books expanding at the fastest pace since December last year.
Despite companies ramping up output, backlogs of work built up at a record pace. Meanwhile, input price inflation further softened from the peak seen in January.
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 UAE PMI survey, Khatija Haque, Head of MENA Research at Emirates NBD, said: “The headline PMI rose to a 2018-high in June, reflecting a sharp increase in both export and domestic new orders as well as output. In spite of this strengthening demand, there was almost no job growth or increase in wages in the UAE’s private sector last month, as firms continued to focus on efficiency and cost containment.”
The headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI) – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – rose to 57.1 in June, up from 56.5 in May. The latest expansion in the non-oil private sector was the strongest in 2018 so far and well above the series’ historical average (54.7).
Output growth across the non-oil private sector accelerated to a seven-month high during June’s survey. Rising output has been recorded continuously since February 2010, with the latest increase sharp overall. According to anecdotal evidence, higher business activity was associated with strong inflows of new work.
Promotional activity, business investment and solid client demand from both domestic and export markets was linked to June’s steep expansion of new order books. The rate of growth was the strongest in the year-to-date. Reflecting a sharp improvement in new business and easing job creation, backlogs of work increased at a record pace in June.
On the price front, average cost burdens faced by non-oil private sector companies increased at a slower pace in June. In fact, the rate of input price inflation was only slight overall and the weakest in three months. Easing staff cost and raw material price inflation contributed to lower overall input cost inflation in June. Meanwhile, price discounting continued for the second month running, albeit to a softer extent than that seen in May.
Business confidence hit a fresh-survey high in June. According to anecdotal evidence, business investment, marketing initiatives and an anticipated economic upturn underpinned positive sentiment.
Purchasing activity growth eased to a two-year low during the latest survey. That said, the pace of expansion remained solid overall. Meanwhile stocks of purchases held at non-oil private sector firms increased at the slowest pace in 25 months during the most recent survey. Some firms noted that they had looked to streamline operations.