UAE private sector growth hits 19-month high in March
As business conditions improved, the non-oil private sector in the UAE gained further momentum in March but intense market competition prevailed though, according to a new survey.
The sector has been performing well since the beginning of the year on the back of sharp increases in output and new orders. Stocks of purchases of firms also rose significantly during the month, Emirates NBD PMI for the UAE showed.
The sector also witnessed a growth in employment as companies added new jobs to their payroll although at a modest rate.
The Purchasing Manager Index (PMI) climbed to a 19-month high of 56.2 in March, from 56.0 in February. The 50-point mark separates growth from contraction.
The reading was consistent with a sharp improvement in business conditions. As a result, the quarterly average for the first quarter of 2017 (55.8) was the strongest in one-and-a-half years, the survey produced by Markit said.
“The latest PMI survey for the UAE points to encouraging growth in the non-oil economy through the first quarter of 2017. What was particularly notable in this report was the degree of optimism among local firms about the potential for further improvements in client demand, which was evident in a strong rise in purchasing activity,” said Tim Fox, Head of Research and Chief Economist at Emirates NBD.
The increase in the headline index was supported by sharper growth of business activity. In fact, the rate of expansion accelerated to the sharpest in 25 months. New projects, a further general improvement in economic conditions and market demand were reported as factors behind output growth, the survey said.
Rise in business activity
The increase in the headline index was supported by sharper growth of business activity. In fact, the rate of expansion accelerated to the sharpest in 25 months. New projects, a further general improvement in economic conditions and market demand were reported as factors behind output growth.
Meanwhile, growth in new order book volumes jumped to a 19-month high and was sharp overall.
More construction activity, good quality products and promotional activities were behind the rise in new orders, anecdotal evidence suggests. New export business also expanded in March.
Modest job creation
As job creation was only modest, the rate of backlog accumulation edged up to a six-month high. Companies reported that higher demand had contributed to rising work outstanding.
Higher new order intakes prompted firms to scale up buying levels. In fact, the rate of expansion was the most marked in over one-and-a-half years. Subsequently, the rate of inventory accumulation accelerated to a survey-record high. Respondents commented on new order intakes and expectations of further improvements in client demand.
“Firms faced increased cost pressures amid a general rise in market prices due to higher demand for raw materials, according to anecdotal evidence. The rate of overall input price inflation quickened in March. However, firms registered no change in output prices. Firms that raised charges passed on higher cost burdens to clients, while other firms reportedly offered discounts due to intense market competition.” The survey said.