Growth in business activity in the UAE’s nonoil private sector edged up to an 11-month high in May, a purchasing managers’ survey showed.
It has indicated a further improvement in operating conditions in the UAE’s nonoil private sector last month, led by a marked and accelerated rise in volumes of incoming new orders.
Output continued to increase, but at a slower pace than sales, leading to further growth of backlogs and associated increases in employment.
The headline seasonally adjusted HSBC UAE PMI — a composite indicator designed to provide a single-figure snapshot of the performance of the non-oil private sector — registered 53.8 in May, slightly up on April’s 53.5 and the strongest reading for 11 months.
Improved operating conditions largely emanated from rising sales volumes, which also increased at the fastest pace since last June. Panelists indicated that market conditions were relatively buoyant, with advertising, promotional work and good marketing all reported to have supported efforts to win new contracts during the latest survey period.
Latest data implied that the domestic market was a key source of new orders in May.
Export sales continued to rise, although with some reports of a slower global economy, the rate of growth was slightly weaker.
Companies in UAE’s nonoil private sector responded to a sharp increase in their order books by increasing production volumes.
Growth was again solid, although was slightly down on April’s recent high and below that signaled for new orders.
Subsequently, further pressure on capacity was created in May, as highlighted by another increase in backlogs of work. Latest data marked the third successive month that work outstanding has risen, which encouraged companies to add to their payroll numbers.
Employment rose for a fifth successive month, and at the sharpest pace since last July as firms tried to keep on top of their higher workloads.
Finally, on the price front, faster rises in both salaries and purchase costs led to a sharp increase in overall input prices.
Panelists largely blamed strong demand for rising purchase prices, although some noted that oil-related product costs had increased. A modest rise in staffing costs reportedly reflected the compensation of workers for a higher cost of living.
Efforts to protect margins resulted in sustained output charge inflation in May, with the rate of inflation the sharpest for seven months (albeit one that was well below inputs).
Commenting on the UAE PMI survey, Simon Williams, chief economist for Middle East & North Africa at HSBC, said:
“It’s a good reading and, given the weakness PMIs are showing elsewhere in the world, the pick up in the new orders and employment scores is particularly encouraging. The UAE’s reliance on external demand and foreign funding, though, and the limited fiscal stimulus that’s in place, mean it will be hard for the economy to continue to build momentum, particularly as we move into the hot summer months.”
UAE’s business activity at 11-month high
