UAE non-oil business activity in May strongest in nearly five years

The headline seasonally adjusted Emirates NBD Purchasing Managers’ Index climbs to 59.4

Visitors at Al Wahda Mall in Abu Dhabi. The UAE's PMI increased in May at the fastest pace in nearly five years on the back of new business orders. Victor Besa / The National

The non-oil private sector economy in the UAE accelerated at the fastest pace since October 2014 on the back of new business orders.

The headline seasonally adjusted Emirates NBD Purchasing Managers’ Index (PMI) for the UAE's non-oil private sector economy rose in May to 59.4 up from 57.6 the prior month. A reading above 50 indicates improvement and growth in business activity. This was the third successive monthly increase in the index, with the latest reading signalling a substantial improvement in business conditions.

The record rise in business activity came on the back of stronger market demand, marketing activity and the start of new projects. Companies in the Arab world's second biggest economy largely expect growth to continue over the coming year, with business optimism only fractionally weaker than the previous month’s record high.

“While the rise in the headline PMI indicates faster GDP growth in the UAE’s non-oil private sector, the [economic] environment remains a challenging one for businesses,” Khatija Haque, head of Mena Research at Emirates NBD, said. “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.”

The rate of growth in new business in the non-oil private sector also increased markedly, and was at a near-record pace, improving underlying demand. New export orders also rose at the fastest pace in the near 10-year survey history, Emirates NBD said.

Higher new orders led companies to increase their purchasing activity, which rose at a record pace. Positive expectations regarding future workloads encouraged stock building midway through the second quarter.

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