UAE’s non-oil private sector growth modestly increased in February


The UAE’s non-oil privates sector showed a modest growth last month with output rising at a marginally faster rate, according to the Emirates NBD UAE Purchasing Managers’ Index (PMI)

The February index rose to 53 from a 52.7 in January, signalling growth in the non-oil private sector compared to persistent slowdown in four of the previous five months.

The overall improvement in business conditions was helped by expansions in output, new orders and employment. All three variables rose slightly faster than in January, but the respective indexes remained below long-run trends. Meanwhile, with total cost pressures remaining muted, firms cut charges to the greatest extent since March 2010 as they competed to secure new clients.

“Total new orders accelerated (54.6), as export demand recovered from a flat January and as firms cut prices to attract new business. New export orders component of the PMI rose to 52.6 in February from 50.2 in January, but this rate of expansion is still lower than the series average. Employment rose at the fastest rate in three months, with this index rising to 52.1,” said Khatija Haque, Head of Mena Research at Emirates NBD .

Respondents attributed faster jobs growth to increased workloads and new project start-ups. The increase in new work was also sufficient to lead to further growth of business.
Staff costs were relatively contained. Overall input costs increased at a slightly faster rate in February, but price pressures remain modest. US dollar strength and low commodity prices helped in keeping producer inflation contained.

Competitive pressures

Output prices declined for the fourth consecutive month and at the fastest rate in nearly six years. Firms surveyed cited competitive pressures and efforts to clear stocks as reasons for cutting prices last month.
Purchasing activity and inventories rose at a similar pace to January, but the rate of increase in both remained relatively modest at 53.6 and 52.3 respectively. Backlogs of work also increased only slightly last month and remain low by historical standards, suggesting there is spare capacity in the UAE economy.

“The improvement in the Emirates NBD UAE PMI last month is encouraging, particularly against a backdrop of low oil prices, global growth concerns and a strong dollar. However, the rate of growth in the non-oil private sector remains much weaker than a year ago, when the headline PMI registered 58.1. We expect the environment over the coming weeks to remain challenging, with several global factors weighing on sentiment and activity,” said Haque.


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