Sharp increase in UAE job creation as business booms

The UAE’s Purchasing Managers’ Index (PMI) rose to 58.2 in June from 57.3 in May, and just shy of the series high in April. The UAE PMI, compiled by HSBC, rose on the back of the country’s non-oil producing private sector companies reporting sustained sharp increases in output, new orders and new export orders. The rates of growth for both output and new exports reached their highest levels since the survey began in August 2009. According to the PMI report, the rate of job creation was solid overall and remained amongst the highest in the series history, despite easing slightly from the previous month. Meanwhile, backlogs at UAE non-oil private sector firms continued to increase during June, indicating rising capacity constraints at their units. “The UAE boom continues to gather pace,” said Simon Williams, Chief Economist for Middle East & North Africa at HSBC. “Output is rising quickly, new orders are strong and the labour market is in rude health,” he said. “There is clear evidence in the data that on the back of such strong growth, inflationary pressures are rising quickly, but for now, those pressures are being contained, leaving the UAE ending the first half of the year on its strongest footing in six years,” Williams noted. June data signalled a further marked improvement in operating conditions at the UAE’s non-oil producing private sector companies. The headline index rose from 57.3 in May to 58.2, just shy of April’s record-high and well above the long-run series average of 53.8. Following the trend observed throughout most of the survey history, non-oil private sector output in the UAE expanded further in June. The pace of growth was the quickest on record, with firms attributing the increase in output to growth in new orders. New order growth was strong in June, with firms pointing to improved market conditions facilitating greater levels of demand. The pace of expansion was quicker than in May, and amongst the sharpest on record. Growth in new export business was at a survey-record high during the month. Over 31 per cent of surveyed companies indicated an increase in foreign sales, with stronger levels of demand in neighbouring economies the primary factor behind the increase. Firms also noted strong efforts from staff and successful marketing campaigns as contributing factors to the increase in new export orders. In line with rising output and new orders, companies continued to increase their payroll numbers in order to meet higher business requirements. Overall input prices rose in June, with the rate of cost inflation picking up noticeably from May. Purchase prices increased sharply, with panellists stating that greater market demand and higher prices for some raw materials were the main inflationary pressures. Meanwhile, staff costs picked up only marginally. Despite the rise in input costs, UAE non-oil private sector firms lowered their prices for the third month in a row in June. As was the case last month, strong market competition was pointed to as the main reason for the reduction. Purchasing activity increased further in June, with the rate of growth the sharpest in the series history. Anecdotal evidence suggested that strong levels of sales and greater demand were the main reasons behind the expansion. Pre-production inventories accumulated as firms prepared to meet an expected rise in output requirements.