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Abu Dhabi, UAEWednesday 17 October 2018

UAE non-oil private sector reaches new high in June, says Emirates NBD

Strong inflows of new business reported in latest Purchasing Manager’s Index

Non-oil private sector conditions in the UAE reached a 2018 high in June, Emirates NBD's latest PMI survey shows. Pawan Singh / The National
Non-oil private sector conditions in the UAE reached a 2018 high in June, Emirates NBD's latest PMI survey shows. Pawan Singh / The National

Business conditions in the UAE’s non-oil private sector improved to their highest level year-to-date in June, boosted by strong inflows of new businesses and output growth, according to lender Emirates NBD.

The latest headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – rose to 57.1 in June from 56.5 in May. The latest expansion was the strongest in 2018 so far and well above the series’ historical average of 54.7.

“The headline PMI rose to a 2018 high in June, reflecting a sharp increase in both export and domestic new orders as well as output,” said Khatija Haque, head of Mena Research at Emirates NBD.

“In spite of this strengthening demand, there was almost no job growth or increase in wages in the UAE’s private sector last month, as firms continued to focus on efficiency and cost containment.”

Output growth across the non-oil private sector accelerated to a seven-month high in June, while rising output – recorded continuously since February 2010 – increased sharply last month owing to higher business activity, Emirates NBD said.

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Promotional activity helped to stimulate client demand, businesses said, reflected by new order books expanding at the fastest pace since December last year, with solid client demand from both domestic and export markets.

Input price inflation further softened from its peak in January and was the weakest in three months, according to the survey, while easing staff costs and raw material price inflation contributed to lower overall input cost inflation in June.

However, despite companies ramping up output, backlogs of work built up at a record pace and price discounting continued for the second month running, albeit to a softer extent than in May.

Stocks of purchases held at non-oil private sector firms increased at the slowest pace in 25 months during the most recent survey and some firms said they had looked to streamline operations, Emirates NBD said. While purchasing activity growth eased to a two-year low during the latest survey, the pace of expansion “remained solid overall”.

At the same time, levels of business confidence reached a new survey high in June, with an anticipated economic upturn driving positive sentiment together with new flows of business investment.