The UAE non-oil companies saw growth strengthen again in April as signs of improving market conditions drove steep expansions in new orders and business activity, says a report.
According to Emirates NBD UAE Purchasing Managers’ Index (PMI) for April, business confidence hit a record high for the second month running. However, there were still signs of competitive pressures in the economy as companies lowered their output prices as part of efforts to boost sales. In addition, they restricted the pace of job creation to try and limit cost burdens.
The headline seasonally adjusted Emirates NBD UAE PMI – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – rose for the second month running in April, hitting 57.6 from 55.7 in March. The reading signalled a sharp monthly improvement in business conditions, and one that was the greatest since December 2017.
Latest data pointed to a sharp acceleration in the rate of new order growth at UAE non-oil companies, with the pace of expansion at a 16-month high. Panellists pointed to improvements in market conditions. External demand also picked up markedly as new work from Saudi Arabia and Oman in particular pushed the rate of growth in new export orders to a near four-year high. Higher new orders combined with a number of ongoing projects led to a substantial rise in business activity in April.
Moreover, the rate of expansion was the fastest since January 2015. Some panellists reported that promotional efforts had helped to boost activity. The offer of discounts to customers led to a seventh successive monthly fall in output prices, and one that was more marked than seen in March. Companies were able to reduce charges thanks to a relative lack of cost inflationary pressures.
Khatija Haque, Head of MENA Research at Emirates NBD, said the improvement in the volume of activity and new order growth last month is encouraging. However, with firms still competing on price, there is still a reluctance to boost hiring and we haven’t seen a meaningful improvement in job growth.
“Household consumption is likely to remain constrained in the absence of job and/ or wage growth,” she said.
Both purchase prices and staff costs rose only marginally in April. As part of efforts to limit cost inflation, staffing levels were raised only slightly again at the start of the second quarter, despite strong increases in workloads.
A combination of sharp new order growth and relatively weak hiring led backlogs of work to rise at a faster pace.
Business confidence was the highest since the series began seven years ago during April, as expectations of higher new orders supported optimism in the 12-month outlook for activity.
Around 82% of panellists predicted a rise in output over the coming year. Purchasing activity continued to rise sharply, while stocks of purchases were accumulated to the greatest extent since March 2018.
Despite stronger demand for inputs, suppliers’ delivery times shortened as vendors responded well to requirements for faster deliveries.