PMI climbs to six-month high in January
Dubai - January data signalled a solid improvement in the health of the UAE’s non-oil private sector. Underpinning the latest upturn were expansions in output and new work, with the latter supported by improved foreign demand. In response to increased new business, companies raised their payroll numbers for the ninth straight month. On the price front, data highlighted divergent trends in January as firms continued to cut their prices charged in spite of a faster rise in cost burdens.
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.
Commenting on the Emirates NBD UAE PMITM, Khatija Haque, Head of MENA Research at Emirates NBD, said.
“The January PMI data shows that output and new order growth remains strong, and the improvement in export demand last month is particularly welcome after a relatively soft 2016.”
Key Findings
- Output expands at sharp rate
- New order growth accelerates to fastest since September 2015
- Firms continue to cut their charges, despite stronger cost inflation
Rising from 55.0 in December to 55.3 in January, 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 – posted the highest reading since July 2016. That signalled a notable improvement in the health of the sector, particularly in the context of the trends over 2016 (53.9) and the survey as a whole (54.5).
The upward movement in the headline index was supported by a sharper increase in new work during January, with new business rising at the quickest rate in 16 months. Anecdotal evidence highlighted promotional activities, increased client demand and stronger underlying economic conditions as key factors boosting growth of new business inflows. Moreover, growth of new export orders quickened to a 14-month high.
Panellists scaled up output and input buying to cater for existing and expected new orders. In both cases rates of expansion eased since December, but remained sharp.
On the jobs front, a further increase in payroll numbers failed to alleviate pressures on operating capacity. The rate of backlog accumulation was slight overall as the vast majority of monitored firms (91%) recorded no change in work-in-hand.
Latest survey data pointed to mounting cost pressures in the UAE’s non-oil private sector. Sharp input price inflation was predominantly driven by a marked increase in purchasing prices as staff costs rose only slightly.
That said, output charges decreased for the fifteenth consecutive month in January, with a number of companies citing intense market competition. However, the pace of reduction was slight overall and the weakest seen in five months.
Average lead times improved at a sharp rate that was broadly in line with that registered in the previous month.
Finally, UAE non-oil private sector businesses remained optimistic towards the 12-month outlook for output at the start of the year. Those firms that were upbeat about the year ahead commented on expectations of further improvements in market conditions and strengthening client demand.
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© Press Release 2017
