UAE: PMI rises to 16-month high in April as output soars, supported by GCC demand


UAE: PMI rises to 16-month high in April as output soars, supported by GCC demand

The Emirates NBD Purchasing Managers’ Index (PMI) rose from 55.7 in March to 57.6 in April, the highest reading since December 2017. Consequently, the index remained above the 50-point threshold that separates expansion from contraction in the non-oil producing private sector.

The improvement in business conditions in April came on the back of a sharp rise in both new orders and production, with the output index rising to an over four-year high. Domestic and export demand growth both accelerated in the month, supported by ongoing price discounting from firms and by a further improvement in orders from GCC countries and Europe. Meanwhile, backlogs of work also increased at a faster rate.

Despite the improving demand conditions, employment gains remained subdued, similarly to the previous months, due to companies’ efforts to keep costs down. Indeed, selling prices fell for the seventh consecutive month and at a somewhat sharper rate than in March, highlighting steep competition. However, input cost inflation softened as well, supporting firms’ bottom line.

Consistent with the strong recovery in demand observed since March, purchasing activity remained robust, and firms increased their inventories at a slightly faster pace than the solid increase registered in the previous month, confirming that firms were starting to replenish their stocks after several months of broad stability. Nonetheless, purchasing activity far outpaced stock building. According to Khatija Haque, head of MENA research at Emirates NBD, this suggests that firms are becoming more efficient in their inventory management processes

Lastly, business sentiment reached a survey-high in the month, with over four out of five respondents expecting production levels to increase in the year ahead. Looking ahead, the domestic demand outlook should further be supported by the ramping-up of fiscal spending—at the emirates and federal level—related to Expo 2020 and infrastructure investment.

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