UAE private business growth improves but jobs growth slows

The UAE’s non-oil private sector lost some growth momentum in April, with business conditions improving at the weakest pace in three months, according to the latest PMI data.

The UAE Purchasing Managers’ Index (PMI) posted 52.8 in April, down from March’s four-month high of 54.5.

Though still consistent with a solid improvement in business conditions, the latest reading was only just above the near-four year low seen in January.

It was also below the Q1 average (53.4), which was the weakest since the opening quarter of 2012.

Output, new orders and input stocks all rose more slowly, but the main drag on the sector was a stagnation in employment, said the report.

It was only the second time that payroll numbers had failed to rise in the survey’s history. Meanwhile, cost pressures remained subdued and charges continued to fall. Greater competition was again cited as the main driver of lower tariffs.

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.

“Growth momentum in the UAE slowed a little in April after rebounding in March. External demand remains relatively subdued, and firms appear to be reluctant to increase hiring, despite solid growth in new orders and output last month,” said Khatija Haque, Head of Mena Research at Emirates NBD.

“The PMI data year-to-date points to slower, but still positive, growth in the UAE’s non-oil sector, which is in line with our expectation for slower real GDP growth in 2016,” she said.

Key Findings

    Slower growth of output and new work
    Employment stagnates, ending 51-month period of job creation
    Tariffs fall for sixth month running

A stagnation in payroll numbers at UAE non-oil private sector firms was a key factor behind the overall slowdown in growth. Employment was unchanged following 51 successive months of job creation. Moreover, April was just the second month since data collection began in which staffing levels had failed to rise.

In contrast, both output and new orders increased solidly in April. Enhanced marketing strategies and discounted prices had reportedly helped companies to secure new business, and activity rose in turn.

That said, the respective rates of expansion were slower than in March. Data showed that growth of total new work was weighed down by lower exports for the second straight month. The latest decline in new business from abroad was only marginal, however.

With new business rising and employment remaining unchanged, backlogs of work increased for the fourth straight month in April. The rate of accumulation picked up since March but was still modest overall.

Reflective of the slower expansion in new orders, growth of purchasing activity eased in April. In fact, the increase was the least marked in three years. Some panellists indicated that they had sufficient inventories, and this was borne out by data which showed input stocks rising at the slowest pace since September 2013.

On the price front, the rate of input cost inflation remained historically muted in April. In particular, purchase prices rose to the least extent in three months. Relatively weak cost pressures enabled firms to cut charges again. The latest fall was the sixth in as many months. There were reports that greater competition had led companies to reduce their tariffs.

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