UAE business conditions improve in April

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Staff Report

Dubai: The latest survey data showed that business conditions across non-oil private sector firms in UAE continued to improve markedly at the start of the second quarter. Sharp increases in output and new orders were a key factor behind the overall upturn, as was a survey-record increase in pre-production inventories. Meanwhile, firms increased their payroll numbers at a modest pace. On the price front, firms offered discounts to attract customers despite reports of higher 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 PMITM, Tim Fox, Head of Research and Chief Economist at Emirates NBD, said:
“The UAE PMI remained little changed in April from March, at both a headline level and in terms of the detail. The PMI shows that while overall activity was firm going into the second quarter, companies are still facing significant challenges as job creation remains subdued and pricing power is limited.”
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 – posted at 56.1 in April, from 56.2 at the end of the first quarter. This signalled a sharp improvement in the health of the sector, with the PMI close to March’s 19-month high. Notably, the headline index remained stronger than the series long-run average of 54.5.
Underpinning growth of the non-oil private sector as a whole was a sharp expansion of output. The rate of growth softened since March, but was the second-sharpest in 26 months. Panellists commented on new projects, stronger underlying demand and favourable economic conditions.
Meanwhile, new order book volumes rose at a sharp pace, despite growth easing to a four-month low. Marketing initiatives, good quality products and construction work contributed to further improvements in market demand, according to respondents. New export orders rose for the fifth month in succession, albeit at a much slower pace than that seen for total new orders.
Firms increased their payroll numbers for the twelfth month in a row, in response to increased output requirements. However, the rate of job creation remained modest and below the series average. As a result, backlogs accumulated for the fourth month in succession.
Meanwhile, sharp growth of purchasing activity was recorded. As a consequence, the pace of pre-production inventory accumulation climbed to a record high, as panellists continued to build stocks due to projections of further improvements in demand.
Non-oil private sector firms operating in UAE faced divergent price trends at the start of the second quarter. Firms that reported higher cost burdens blamed a general increase in market prices for raw materials and higher demand for inputs. The rate of inflation was solid and only slightly slower than the preceding month. On the other hand, firms reduced output charges at a modest pace, the first fall in three months. There were reports that intensive competition led firms to offer discounts to attract customers.