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UAE non-oil sector continues to grow at a strong pace, creating more jobs in July

S&P Global PMI reading indicated a sharp improvement in the health of the sector, supported by a marked expansion in output

The UAE's non-oil economy continued to grow steadily in July as companies raised their activity levels considerably, resulting in a moderate rise in employment.

The S&P Global UAE Purchasing Managers' Index (PMI) – an indicator designed to give an overview of operating conditions in the non-oil private sector economy – dropped from 56.9 in June to 56.0 in July but remained well above the 50.0 no-change mark and the series long-run average. The reading indicated a sharp improvement in the health of the sector, supported by a marked expansion in output.

The latest released by the Federal Centre for Competitiveness and Statistics this week showed the UAE economy growing at 3.8 per cent in the first quarter, faster than overall projections for the whole year, driven by the strong growth in non-oil sectors.

David Owen, senior economist at S&P Global Market Intelligence, said the latest PMI data pointed to a slight recalibration of the strength of the UAE non-oil economy in July, as new business growth slowed from its four-year high in June and the output expansion subsequently lessened. “Nevertheless, the headline PMI reading of 56.0 showed that the sector remained in good health in general, with market conditions continuing to improve and firms reporting strong rates of both customer demand growth and job creation,” said Owen.

Despite slowing from June's recent high, the rate of activity growth was considerable at the start of the third quarter, with approximately 30 per cent of survey respondents noting a rise in output from the previous month. This compared with less than 2 per cent that reported a fall.

S&P said driving activity higher was an upturn in new orders, which continued to be boosted by strong customer demand and improving market conditions, according to survey panellists.

Meanwhile, new export orders were broadly stagnant. Owen added that firms were confident that activity levels will continue to grow, with optimism at its second-strongest level in just over a year.

“Boosting confidence was a softening of input cost pressures, which allowed firms to reduce their selling prices and expand stock holdings.”

S&P data showed output expectations for the year ahead were upbeat in July, climbing to the second-highest level in just over a year.

"At the outset, the July findings signalled that the UAE non-oil sector will continue on its expansion path in the second half of this year. That said, the easing of sales growth was substantial and, if accelerated in future months, suggests that the demand boom could have reached its peak,” said Owen.

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