UAE non-oil private sector continues growth momentum

Growth momentum in the UAE’s private sector non-oil activity continued to strengthen in December 2016, driven by improving economic conditions, according to Emirates NBD.

Output rose at the "sharpest" pace to a 16-month high on back of new orders backed by growth of new export businesses, the bank’s latest purchasing managers’ index (PMI) revealed on Wednesday.

On the price front, a further rise in input costs was registered but competitive pressures and promotional offers lead to decline in output prices, it said.

The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.

"The Emirates NBD PMI indicates a solid expansion in the non-oil private sector in Q4 2016. Strong gains in output and new orders have been hard-won however, with firms continuing to offer discounts and promotions in order to secure orders. Overall, the PMI averaged 53.9 in 2016, well below the 2015 average of 56.0, reflecting slower growth this year," said Khatija Haque, head of MENA research at Emirates NBD, in a press release.

The PMI rose to 55.0 in December from 54.2 in November, signalling a marked monthly improvement in the health of the non-oil private sector and "one that was the strongest since July".

Higher new orders, improving economic conditions and marketing activities all contributed to output growth. Activity rose substantially over the month and to the greatest extent since August 2015.

New business rose at a sharp pace that was broadly in line with that seen in the previous month with improving client demand and the efforts of sales teams contributing to the rise, the bank said.

Meanwhile, new export orders increased, ending a five-month sequence of decline. Efforts to secure sales in a "competitive environment" have meant that output prices fell in December in spite of a further rise in cost burdens. Charges have now declined in each of the past 14 months. Purchase prices have risen in three successive months, with the latest increase the fastest in this sequence.

There were signs that operating capacity was sufficient to deal with current workloads despite a marked increase in new work during December.

Backlogs of work declined for the first time in 32 months, while the rate of job creation remained modest as 96 percent of the respondents opting to leave their staffing levels unchanged, the bank said.