Robust private sector activity results in UAE jobs growth

The latest UAE Purchasing Managers’ Index (PMI) published by Dubai’s Emirates NBD shows robust improvement in business conditions at UAE non-oil private sector firms.

The PMI is a composite indicator designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy.

The headline seasonally adjusted UAE PMI posted 56 in September, down from 57.1 in August but still indicative of a solid improvement in business conditions, the bank said.

Growth has been relatively strong throughout the third quarter, with the respective average (56.3) coming in only just below the trend observed so far in 2015 (56.7).

The survey, sponsored by Emirates NBD and produced by Markit, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.

“The strength of total new order growth is particularly encouraging, given the remarkable weakness in export orders last month, and in our view underlines the strength of domestic demand in the UAE even against a backdrop of low oil prices,” said Khatija Haque, Head of Mena Research at Emirates NBD.

Higher output and new orders remained the key drivers of overall growth, supported by further rises in employment and input stocks.

That said, the rate of hiring eased to a six-month low at the end of Q3, while growth of total new work was undermined by the first drop in foreign orders since May 2010. On the price front, a sharper rate of cost inflation was reflected in a renewed increase in output charges. 

Key Findings

• Marked expansions in output and new orders underpin improvement in business conditions

• New export work falls for first time since May 2010

• Jobs growth eases to six-month low

Underlying data suggested that sharp rises in both output and new orders contributed to the strong performance of the sector as a whole. Despite easing slightly since August, the respective rates of expansion remained above their historical averages. Enhanced marketing strategies and reputations for quality were cited as factors behind growth of new business, which subsequently led to a rise in production during the month.

However, the expansion in total new orders was restricted by a fall in new export work during September. The latest decline was only slight, but it was the first seen in nearly five-and-a-half years. Some companies attributed weaker new business from abroad to greater competition.

Meanwhile, input buying rose for the sixty-second month in succession during September. The rate of growth eased to the slowest in three months, but remained faster than the long-run trend. Subsequently, pre-production inventories also increased.

Job creation was sustained in September, amid further growth of new business. That said, the latest increase in staffing levels was only modest overall, and the weakest since March. Backlogs of work continued to rise as a result, although the rate of expansion eased from August’s record.

UAE non-oil private sector firms reported ongoing cost pressures in September, as total input prices rose for the sixth straight month. The rate of inflation was the steepest in almost a year, driven by higher salaries and purchasing costs.

Finally, average tariffs increased for only the second time in eight months. The latest rise was only marginal, however, as the passing through of higher input costs was partially offset by discounts offered in the face of strong competition.

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