The UAE Purchasing Managers’ Index, a measure to see the operating conditions in the non-oil private sector economy, recorded its third monthly increase in May.
The PMI rose from 57.6 in April to 59.4 in May. Companies responded to the expansions in business activity and near-record-high new orders by increasing purchasing activity sharply, but employment was left unchanged, Emirates NBD mentioned in its report.
The latest increase was due to stronger market demand, marketing activity and the start of new projects. Companies expect growth to continue over the coming year, with business optimism only fractionally weaker than the previous month’s record high, the bank said.
The head of Mena research at Emirates NBD, Khatija Haque, said even if there is a rise in the headline PMI indicates faster GDP growth in the non-oil private sector, the environment remains a challenging one for businesses.
The World Bank has said the UAE is expected to be among the fastest-growing Gulf economies this year with a projected almost 3 percent expansion on the back of continued infrastructure spending and economic stimulus. It also forecasts more than 2.8 percent GDP growth by 2020.
The International Monetary Fund in its latest circular on the UAE noticed that enabling the environment for small and medium-sized businesses and encouraging foreign direct investments were significant priorities. They promoted leveling of the playing field between government-backed entities and the private sector to foster productivity and diversification of the economy.
The domestic credit growth, increase employment, and higher tourist numbers will maintain to underpin economic activity, even as the real estate sector faces overhang of supply.
The May employment index 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. Positive expectations on future workloads encouraged stock building midway through the second quarter.
While new orders and business activity increased at a substantial rate, non-oil companies are reluctant to employ additional staff. Hiring was broadly unchanged during the month, with almost all respondents leaving their staffing levels stable.