UAE business activity surges to four-month high

Business conditions in the country improve, driven by sharper rises in output and new orders

March data signalled a second consecutive pick-up in the rate of improvement in the health of the UAE’s non-oil private sector, according to the latest UAE PMI survey report.

The report shows that business conditions in the country improved at the strongest pace in four months, mainly driven by sharper rises in output and new orders.

Notably, total new work increased more quickly in spite of a renewed fall in exports. Both employment and input stocks remained in growth territory, the report highlights, but notes that the respective rates of expansion eased slightly.

On the price front, input costs rose only modestly, meaning that companies were able to reduce their tariffs amid greater competition.

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.

Adjusted for seasonal factors, the headline PMI climbed to a four-month high of 54.5 in March, up from 53.1 in February.

The latest figure indicated that growth had continued to rebound from January’s near-four year low.

That said, the improvement in business conditions across the first quarter (53.4) was the weakest on average since Q1 2012, the report highlighted.

Khatija Haque, Head of Mena Research at Emirates NBD, said that despite the acceleration in March, the overall Q1 PMI signalled a slowdown in the non-oil private sector of the UAE at the start of this year.

“Nevertheless, the solid growth in output and new orders in the first quarter suggests that domestic demand is holding up well despite the headwinds of a strong USD and low oil prices,” she said.

Key Findings

    Faster expansions in output and new work...
    ...but exports fall for first time in six months
    Fifth successive decline in charges

Growth of the non-oil private sector as a whole was supported by higher output and new work during March. In particular, output rose at the quickest rate since last September, helped by enhanced marketing efforts and incoming new projects.

New business also increased at a faster pace. However, the expansion was subdued relative to the long-run trend, with data highlighting weakness in international demand. New export orders fell for the first time in six months, albeit only marginally.

The sharp rise in output requirements was reflected by firms’ purchasing during March. Growth of input buying picked up to a four-month high, with panellists commenting on stronger-than-expected sales. Firms were also upbeat towards future demand, leading them to build up their pre-production inventories. That said, the rate of accumulation was only modest overall.

Prices data pointed to subdued cost pressures in March. The rate of input price inflation was only modest overall, despite accelerating to the fastest so far in 2016.

Subsequently, businesses were able to cut their tariffs for the fifth straight month. Increased competition was cited as the main reason behind the fall.

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