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UAE’s job creation rate at a six-year high

Overall non-oil business conditions improved at a robust rate at the start of the fourth quarter amid a sharp uplift in demand conditions, according to a new survey

Job creation accelerated in the UAE at the sharpest pace in six years as businesses responded to rising backlogs by increasing their employees in October.

Overall non-oil business conditions improved at a robust rate at the start of the fourth quarter amid a sharp uplift in demand conditions, according to a new survey released on Thursday. Businesses also experienced a faster upturn in both output and new orders.

“The strengthening of demand conditions brought additional capacity pressures, leading firms to increase their headcounts at the sharpest rate since July 2016 and purchase inputs to the greatest extent for over three years,” the S&P Global UAE Purchasing Managers' Index survey report said.

Some survey panelists cited that new clients, lower prices, improved services, property boom, and the upcoming Fifa World Cup in Qatar had contributed to the rise in sales.

“New orders from abroad were an area of weakness in October, however. Firms saw the slowest increase in export while purchasing activity rose at the quickest rate in over three years.

A recent Bayt.com survey found that the UAE job market has made a strong recovery from the pandemic-induced slowdown, helped by the government’s fiscal and monetary measures. Seven in 10 UAE companies plan to hire new staff next year, according to another survey. A Bayt.com-YouGov survey has found that 86 per cent of professionals in the UAE have a positive outlook for 2023.

The fast-improving business conditions in the UAE, underpinned by strong macroeconomic growth, align with the bullish growth forecasts issued by both the International Monetary Fund and the World Bank. Both institutions have observed that higher oil revenues and favourable business and investment environment had propelled the UAE on a higher growth trajectory in 2022. While the World Bank revised upward the GDP growth projection to5.9 per cent, the IMF projects a growth of 5.1 per cent this year, the country’s highest growth rate in recent years.

"The UAE PMI crept back up to 56.6 in October, just shy of August's over three-year high of 56.7, indicating that the non-oil private sector had continued to grow at a robust pace at the start of the fourth quarter. The upturn was led by sharp expansions in business activity and new orders, giving further evidence that domestic firms were not only weathering the global economic storms, but enjoying strong demand growth,” said David Owen, economist at S&P Global Market Intelligence.

However, despite the upswing in job creation and business activity, business confidence weakened slightly, and was still subdued compared to the historical trend, the report noted. “Price pressures remained only modest in October, amid reports that lower fuel, metal, and transport costs had partly offset material price increases elsewhere. Subsequently, to maintain a competitive landscape, firms reduced their output charges for the sixth month running.”

The seasonally adjusted PMI, designed to give an accurate overview of operating conditions in the non-oil private sector economy, ticked higher to 56.6 in October, from 56.1 in September, and was only just below August's over-three-year high of 56.7.

"The key movements in October were seen on the capacity side, as businesses responded to rising backlogs by increasing their employment numbers at a faster rate. In fact, the pace of job creation was the quickest since July 2016. Firms also looked to stock up on inputs as they prepare work schedules to address their backlogs, leading to a rapid increase in purchasing activity that was the fastest for over three years,” said Owen.

Pricing data showed that UAE non-oil firms continued to enjoy mild inflationary pressures in October. Input costs rose only slightly, helped by reductions in fuel and transport costs in line with recent falls in global oil prices. “This meant that businesses were able to lower their output charges, although the rate of discounting eased to the softest since July,” he said.

Analysts noted that with demand increasing sharply, businesses faced additional strains on their operating capacity in October, leading to a sharp and accelerated increase in backlogs of work. This was partly linked to existing projects and pandemic-linked shipping delays.

Businesses, they explained, responded in two ways: first, employment numbers were expanded at the fastest pace since July 2016, extending the sequence of growth to six months. Second, firms sharply increased their purchasing activity in a bid to build inventories for future work. Purchases rose to the greatest extent since mid-2019, while shorter lead times contributed to a solid accumulation of input stocks, they said.

— issacjohn@khaleejtimes.com