UAE business sentiment picks up
Non-oil private sector sees sharp rise in new orders and output in March
Conditions have improved to a four-month high in spite of a fall in exports, says Emirates NBD survey.
dubai — Driven by sharper rises in output and new orders, business conditions in the UAE improved at the strongest pace in four months in March.
A survey sponsored by Emirates NBD said total new work increased more quickly in spite of a renewed fall in exports. Both employment and input stocks remained in growth territory, but the respective rates of expansion eased slightly. On the price front, input costs rose only modestly, meaning that companies were able to reduce their tariffs amid greater competition.
Khatija Haque, head of Mena research at Emirates NBD, said while the improvement in the Emirates NBD UAE Purchasing Managers’ Index, or PMI, in March is encouraging, the average PMI for the first quarter of 2016 signals a further slowdown in the non-oil private sector of the UAE at the start of this year.
“Nevertheless, the solid growth in output and new orders in the first quarter suggests that domestic demand is holding up well despite the headwinds of a strong USD and low oil prices.”
The headline Emirates NBD UAE PMI, a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy, climbed to a four-month high of 54.5 in March.
Up from 53.1 in February, the latest figure indicated that growth had continued to rebound from January’s near-four year low. However, the improvement in business conditions across the first quarter (53.4) was the weakest on average since the first quarter of 2012.
The report said growth of the non-oil private sector as a whole was supported by higher output and new work during March. In particular, output rose at the quickest rate since last September, helped by enhanced marketing efforts and incoming new projects. New business also increased at a faster pace.
“However, the expansion was subdued relative to the long-run trend, with data highlighting weakness in international demand. New export orders fell for the first time in six months, albeit only marginally,” the bank said.
The sharp rise in output requirements was reflected by firms’ purchasing during March. Growth of input buying picked up to a fourmonth high. Firms were also upbeat towards future demand, leading them to build up their pre-production inventories. The rate of accumulation was only modest overall.
Employment in the UAE’s nonoil private sector increased further in March, extending the current sequence of job creation to 51 months. The rate of hiring eased since February, however, and was muted in the context of historical data. Meanwhile, backlogs of work rose only fractionally, with some companies suggesting that they had become more efficient in production.
Prices data pointed to subdued cost pressures in March. The rate of input price inflation was only modest overall, despite accelerating to the fastest so far in 2016.
The rise in total input costs was restricted by a marginal drop in salaries — the first recorded since December 2011. Subsequently, businesses were able to cut their tariffs for the fifth straight month. Increased competition was cited as the main reason behind the fall.
The upbeat sentiment recorded in March is in sharp contrast to the report by market research firm Nielsen that 53 per cent of residents polled in the fourth quarter of 2015 believed that they were in recession.
The number of people expressing recessionary sentiment, representing 4.9 million of the UAE’s nearly 10 million population, registered a 10 percentage point increase from the previous quarter, it said.