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Emirates NBD UAE PMI®: at the highest level since October 2014

Highlights from the Emirates NBD Purchasing Managers’ Index® (PMI®)

The strong rise in both output and new orders last month was on the back of continued price discounting by firms he headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index™ (PMI®) rose to 59.4 in May from 57.6 in April The rate of growth in new business in the non-oil private sector also quickened markedly, and was at a near-record pace

The Emirates NBD Purchasing Managers’ Index® (PMI®) is survey compiled by IHS Markit, and contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.

Commenting on the UAE PMI® survey, Khatija Haque, Head of MENA Research at Emirates NBD, said:

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.  The strong rise in both output and new orders last month was on the back of continued price discounting by firms as well as stronger growth in export orders.   Moreover, 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 index in May 2019 was only fractionally above the “no-change” level and wages were stagnant as well, so the sharp rise in the volume of business activity is not yet benefitting households.”

Read more:Highest increase in business output in Dubai in 4 years: Emirates NBD Tracker March 2019

The main findings of the May survey were as follows:

 –Marked accelerations in growth of activity and new business

-Price discounting helps to drive expansion in new orders

-Business sentiment at near-record high

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 – rose to 59.4 in May from 57.6 in April. This was the third successive monthly increase in the index, with the latest reading signalling a substantial improvement in business conditions, and one that was the greatest since October 2014.

A record rise in business activity was recorded in May as the rate of expansion accelerated sharply from the previous month. Stronger market demand, marketing activity and the start of new projects all reportedly contributed to the latest increase. Companies largely expect growth to continue over the coming year, with business optimism only fractionally weaker than the previous month’s record high.

Read more: VAT gives 5% boost to UAE government revenue as compliance reaches 97%

The rate of growth in new business in the non-oil private sector also quickened markedly, and was at a near-record pace. As well as improving underlying demand, companies indicated that price discounting helped them to secure new orders. New export orders, meanwhile, rose at the fastest pace in the near ten-year survey history, with new business from Saudi Arabia and Oman mentioned. 

The aforementioned price discounting was reflected in an eighth consecutive monthly reduction in output prices. Companies were able to lower charges due to muted cost inflation. Overall input prices rose only marginally in May, and at the slowest pace in nine months.

Higher new orders led companies to increase their purchasing activity, which rose at a survey-record pace. Positive expectations regarding future workloads encouraged stock building midway through the second quarter. Inventories of purchases rose to the greatest extent since March 2018.

Although both new orders and business activity increased at substantial rates in May, non-oil companies again displayed a reluctance to hire additional staff. Employment was broadly unchanged during the month, with almost all respondents leaving their staffing levels stable.