DUBAI  - Growth in the United Arab Emirates' non-oil private sector rose in May at its fastest pace since October 2014, although job creation was largely stagnant, a survey showed on Monday.

The seasonally adjusted Emirates NBD UAE Purchasing Managers' Index (PMI), which covers manufacturing and services and provides an overview of the private sector outside of the oil sector, rose to 59.4 in May from 57.6 a month earlier.

A reading above 50 indicates expansion and below that, contraction.

The output sub-index rose to 69.4 in May from 65.3 in April, while the new orders sub-index rose to 69.5 in May from 64.6 in the previous month.

Stronger demand, marketing activity and the start of new projects all reportedly contributed to the increases, with companies largely expecting growth to continue over the coming year, the survey's authors said.

External demand rose at the fastest pace in the index's nearly 10-year history as new work from Saudi Arabia and Oman in particular pushed the rate of growth in new export orders, according to survey respondents.

"While the rise in the headline PMI indicates faster GDP growth in the UAE's non-oil private sector, the environment remains a challenging one for businesses," said Khatija Haque, head of MENA research at Emirates NBD.

Output and new order growth has come on the back of price discounting and new export orders, with job creation and wages remaining stagnant, Haque said.

"When the headline PMI was last at a similar level (in October 2014 and January 2015) the survey showed solid growth in private sector jobs, which is not the case this time."

The employment sub-index nudged down to 50.1, however, with non-oil companies still showing reluctance to hire additional staff.

The UAE economy grew about 1.7% in 2018, slower than projected despite a boost from higher oil prices, preliminary data showed in March. The economy is projected to grow 3.5% in 2019, helped by strong non-oil activity, the central bank said in a quarterly report. 

 

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(Writing by Lisa Barrington; Editing by Hugh Lawson) ((lisa.barrington@thomsonreuters.com ))