Wednesday 04, January 2017 by Jessica Combes

UAE output growth quickens to 16-month high

The UAE’s non-oil private sector continued to see strengthening growth momentum at the end of 2016, according to reports from panellists of improving economic conditions.

New orders increased markedly showing output rising at a sharper pace amid a return to growth of new export business, while a further rise in input costs was registered, but competitive pressures and promotional offers meant that output prices decreased again. 

The headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI), a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy, ticked up to 55 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.

 “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.

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.

Improving client demand and the efforts of sales teams contributed to the sharp rise of new business, while new export orders returned to growth, ending a five-month sequence of decline.

Output prices decreased in December in and effort to secure sales in a competitive environment, in spite of a further rise in cost burdens and charges have now declined in each of the past 14 months. Overall input prices increased at a faster pace amid sharper inflation of both purchase prices and staff costs. Purchase prices have risen in three successive months, with the latest increase the fastest in this sequence.

Signs pointed to sufficient operating capacity to deal with current workloads despite a marked increase in new work during December, and backlogs of work declined for the first time in 32 months. The rate of job creation remained modest as 96 per cent of respondents opted to leave their staffing levels unchanged.

Firms had to increase their purchasing activity in December to meet higher output requirements owing to the sharp rate of expansion which remained unchanged from that seen in November. Stocks of purchases also continued to rise, albeit at a slightly weaker pace than seen in the previous month.

As has been the case throughout the survey’s history to date, suppliers’ delivery times shortened in December. The latest improvement in vendor performance was marked, and attributed by respondents to requirements for faster deliveries. 

  

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