Overall upturn for UAE non-oil business in April
DUBAI — Business conditions across non-oil private sector firms in UAE continued to improve markedly at the start of the second quarter, according to Emirates NBD survey data released on Wednesday.
“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,” said the bank said in its report.
While firms increased their payroll numbers in April at a modest pace, on the price front, they offered discounts to attract customers despite reports of higher cost burdens, said the survey, sponsored by Emirates NBD and produced by IHS Markit.
The UAE Purchasing Managers Index) remained little changed in April from March’s 19-month high of 56.2.
“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,” said Tim Fox, head of Research and chief economist at Emirates NBD.
The seasonally adjusted Emirates NBD PMI 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,” said the report.
“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,” it said. According to BMI Research, a Fitch Group company, economic growth in the UAE will pick up significantly in 2017 and in 2018, driven mainly by growth in the non-oil sector and higher crude oil prices, according to a new report.
On a regional level, the UAE will be one of the outperformers among the Middle East’s oil exporters, given its diversified economy, huge financial reserves and enormous infrastructure plans, BMI Research said on Thursday.
“We believe government cutbacks in spending have largely passed and are particularly optimist on the construction sector. We forecast real GDP growth of 2.8 per cent in 2017 and 3.3 per cent in 2016, a notable uptick on an estimated 2.2 percent growth in 2016,” BMI said.
Jihad Azour, IMF’s Middle East and Central Asia Department director, said Dubai’s economic growth would likely accelerate this year, underpinned by increased spending, including investment in preparation for Expo 2020, and a pick-up in global trade. Dubai’s economy will grow as fast as four per cent from 2.7 per cent in 2016, at a faster pace than most Arab economies, he said.
According to Emirates NBD survey, 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.”
The report said businesses 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.
The survey also noted a sharp growth in purchasing activity in April. “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,” said the report.
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, said the report.
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.”
The PMI shows that overall activity was firm going into the second quarter Tim Fox, head of Research and chief economist at Emirates NBD