The UAE's purchasing managers' index (PMI) for April signalled a second consecutive record rise in activity in the UAE's non-oil producing private sector and both total new order orders and new export orders increased at sharp rates.
The index, compiled by HSBC and Markit Economics is a composite indicator of UAE's non-oil economy based on data compiled from purchasing executives in approximately 400 private sector companies in the UAE.
The UAE's non-oil private sector companies reported a marked improvement in operating conditions, as highlighted by the headline HSBC UAE PMI rising for the third straight month, posting 58.3, up from March's 57.7. The latest reading was the highest in the 57-month survey history.
"The UAE economy is in full swing, led by booming Dubai. The risks of overheating will come sooner rather than later, but for now the UAE is in the sweet spot of its economic cycle - strong growth, firm employment and inflation that is only starting to rise," said Simon Williams, Chief Economist for Middle East & North Africa at HSBC.
Increased order intakes
Sharp output and new order growth had boosted the headline PMI in April, with the respective rates of expansions the highest and joint-second highest on record. Activity rose amid reports of increased order intakes and improving market conditions, while higher sales team efforts and a good economic environment were the main reasons behind the strong rise in new business.
In line with the trend for total new orders, new export business rose markedly. The rate of growth in new export orders accelerated since March and was only fractionally weaker than February's series high. Survey respondents mentioned Middle Eastern countries and China as sources of export growth.
Stronger demand led to the latest solid rise in employment levels at the UAE's non-oil private sector companies, with 15 per cent of the survey panel reporting increased workforce numbers.
Companies in the UAE hired additional workers in April, extending the current sequence of employment growth to 28 months. Increased workloads was the main contributor to the latest hiring efforts, according to surveyed companies. Payroll numbers rose to the largest extent since late-2009. Meanwhile, backlogs of work were largely unchanged since the preceding month, ending an eight-month period of rising work-in-hand.
On the price front, input cost inflation eased to the weakest in nine months amid reports of a slower increase in purchase prices. Staff costs, meanwhile, rose to the greatest degree since December. Despite increased input costs, the UAE's non-oil private sector companies lowered their output prices for the first time in five months.
"Increased activity led to higher employment in the UAE last month, with the employment sub-index rising to its highest level since December 2009. Staff costs also rose at a faster pace in April, contributing to higher overall input costs. However, input prices rose at a slower pace last month, and output costs actually declined (marginally) for the first time in five months. Firms cited competitive market conditions, suggesting that the pass-through from producer inflation to consumer inflation is still limited. Overall, the April PMI data is consistent with our view of strong non-oil growth in the UAE this year, driven both by the improving global outlook as well as growing domestic demand," said Khatija Haque, Head of Mena Research at Emirates NBD.