UAE business conditions improve


Staff Report 

Dubai – Business conditions in the UAE’s non-oil private sector continued to improve in February, with a sharp and accelerated increase in inflows of new work underpinning a robust expansion of output.

Strong demand conditions and a favourable economic environment encouraged companies to scale up purchasing activity and hire additional workers over the month. On the price front, average selling prices rose for the first time in almost one-and-a-half years as firms passed on to clients part of their additional cost burdens.

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 PMI, Khatija Haque, Head of MENA Research at Emirates NBD, said. “The rise in the UAE PMI to the highest level since September 2015 suggests that demand has strengthened, both domestically and abroad.  Higher oil prices have likely contributed to improved sentiment and business activity over the last few months.”

As has been the case in each month for seven-and-a-half years, 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 – recorded above the crucial 50.0 threshold in February, thereby signalling a further improvement in the health of the private sector. Up from 55.3 in January to a 17-month high of 56.0, the latest reading was above its long-run average (54.5).

New business inflows rose sharply and at the fastest rate since September 2015, which survey participants linked to strong underlying demand and better economic conditions. With new export orders also expanding markedly over the month, companies raised output further. In fact, growth of business activity climbed to an 18-month peak.

Greater output requirements encouraged firms to purchase more inputs and hire extra staff. Buying levels increased to the greatest extent since last September, whereas the pace of job creation softened to the weakest in four months.

The upturn in purchasing activity helped companies to build their input stocks in February, which rose sharply and at the second-quickest pace in one-and-half years.

In tandem with softer increases in purchasing prices and staff costs, average input prices rose at a weaker rate during February. Nevertheless, businesses’ charges were raised for the first time since October 2015 as panellists reportedly acted to protect margins.

Amid reports of particular requests for faster deliveries, average lead times facing non-oil private sector firms in the UAE shortened during February. Furthermore, supplier performance improved to the greatest extent since October 2012.

UAE non-oil private sector companies expect the favourable economic scenario to be sustained over the coming 12 months, with one-in-five companies forecasting output growth in the year ahead. In fact, the level of positive sentiment was at a five-month high in February. Optimism reportedly reflected aggressive marketing campaigns, strong demand and new projects in the pipeline.