Business conditions in the UAE’s non-oil private sector improved to a seven-month high in January, on the back of faster output growth and new orders, according to Emirates NBD’s latest tracker.
The seasonally adjusted Emirates NBD Dubai Economy Tracker Index – a composite indicator designed to give an overview of operating conditions in the non-oil private sector economy – rose to 56.3 in January, up from 54 in December. A reading of below 50 indicates the non-oil private sector economy is declining; while above 50 means expansion. A reading of 50 implies no change. The survey is compiled each month by by Emirates NBD and IHS Markit.
The latest figure signalled a strong monthly improvement and one that was greater than the survey average, Dubai's largest lender said.
“The index rebounded after a disappointing December reading… and signalled a good start to the year for the non-oil private sector,” said Khatija Haque, head of Mena research at Emirates NBD.
Faster output growth and a rise in orders drove the improvement in business conditions last month, together with ongoing promotions and price discounts by companies.
The output price index remained below the neutral 50-level in January, signalling another month of lower average selling prices in the UAE, which have declined for eight in the past nine months, according to the tracker.
Purchasing activity was “robust”, the bank said, as companies responded to stronger order growth and higher output. The stock of pre-production inventories declined for the second consecutive month, suggesting that companies are avoiding build-up of stock in anticipation of demand and instead clearing what they have.
Fewer than 3 per cent of companies surveyed for last month’s tracker reported increased hiring in January, despite higher output. Nonetheless, business optimism improved to among the highest point since the index began in April 2012, with more than 68 per cent of companies saying they expected output to be higher in a year’s time.
“Firms expect the improving demand picture to continue in 2019, with this, alongside marketing activities, set to help lead to increases in output,” Emirates NBD said.
The UAE’s economic growth will accelerate this year, spurred by increased private sector credit, higher inward investment, government stimuli and the approaching Expo 2020 event in Dubai, according to the the International Monetary Fund. The country’s non-oil growth is projected to rise to 3.9 per cent in 2019 and 4.2 per cent in 2020, with overall real gross domestic product growth including oil and non-oil growth expected to reach 3.7 per cent for 2019-20, said the fund.