The strong performance of the UAE’s non-oil private sector which was recorded at the start of the third quarter was largely maintained in August, according to a recent business survey.

A survey, supported by Emirates NBD and produced by IHS Markit, includes original data collected from a monthly survey of business conditions in the non-oil private sector in the UAE; which showed that business conditions sturdily improved, reinforced by sharp rises in output and new work. The respective rates of growth held broadly steady following recent highs in July. The health of the non-oil sector was reflected by the further growth of purchasing activity and employment, with the latter picking up to a nine-month high. Meanwhile, charges continued to fall, but only slightly as the impact of higher input costs nearly matched that of competitive pressures.

Khatija Haque, Head of Mena Research at Emirates NBD said, “The slight decline in the August PMI reading is not unexpected given the strong July number. Output and employment appeared to be the main reasons for the slower rate of expansion last month, coming off the highs posted in July. However, output continues to expand at a relatively fast pace and new order growth is also robust. The PMI data is consistent with our view of slower but solid economic growth in the UAE in 2016.”

Key Findings

PMI signals robust improvement in business conditions
Marked expansions of output and new orders
Input buying rises at fastest rate since November 2015

After having risen to a 10month high of 55.3 in July, the headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI) – indicated another month of growth in August. At 54.7, the index was down fractionally but still above the overall series average (54.5), the recent improvements in business conditions was more robust than those seen during the first half of the year.

Underpinning growth of the non-oil private sector as a whole were sharp expansions of output and new work. Rates of increased lessened in July, but remained quicker than respective trend so far in 2016. In addition to raising output to assist ongoing projects, panellists were sustained by successful marketing and a general improvement in client demand.

The increase in overall new work was centred on the domestic market, latest data showed. New export business showed a modest decline, decreasing for the second month in a row and the fourth time since March.

Job creation was meanwhile recorded for the fourth month in a row since August. The proportion of hiring was only minor, however, having slowed from the recent highs seen in July. It was also inadequate to prevent a build-up of backlogs of work, particularly with new orders rising at a marked pace.

Contemplative of new business gains and advanced output requirements, purchasing activity grew in August. In addition the rate of growth quickened to nine month highs. This contributed in turn to a rise in stocks of inputs. Organisations also commented on raising stocks in anticipation of prospective improvements in demand.

August statistics also pointed to the mounting cost pressures in the non-oil private sector in the UAE. Together salaries and buying costs increased to the greatest extent in 22 months. Higher costs were hardly felt by clients. However the strength of the competition ensured that the impact of rising input prices was limited, as charges fell for the tenth straight month. That being said the speed of reduction was the slowest in the aforementioned period and only marginal overall.