Dubai: The UAE’s non-oil private sector companies posted strong growth in August as new orders and output rose and the Purchasing Manager’s Index (PMI) hit a new record.

PMI, compiled by HSBC and Markit Economics is a composite indicator of UAE’s non-oil economy based on data compiled from purchasing executives in approximately 400 private sector companies.

The upturn in the UAE’s non-oil sector gained momentum last month, with the seasonally adjusted PMI rising to a record high of 58.4, up from July’s 58. This surpassed the previous record seen in April.

The index data for last month showed new business expanded at the second-quickest pace in the series history to date and the rate of growth in new export business rose to a record high.

Last month saw a sharp increase in activity at the UAE’s non-oil producing private sector companies. Just under one-quarter of survey respondents reported output growth, while only 3 per cent reported contraction.

“PMI data only strengthens our expectation that the economy will continue to perform well over the remainder of the year and into 2015. Risks may be starting to rise, but for now this is a boom in full flow,” said Simon Williams, Chief Economist for Middle East & North Africa at HSBC.

In line with a sharp expansion in output, new orders rose. Survey panelists linked new order growth to improved economic conditions. Meanwhile, client demand from international markets also strengthened, with the latest rise in new export orders the fastest since data collection began in August 2009.

Input costs increased further in August, with the rate of inflation the highest since May 2012. Purchase prices and staff costs both rose, with panelists reporting that higher market demand and increased raw material costs accounted for most of the rise in purchase prices.

Consequently, the UAE’s non-oil producing private sector companies increased their charges for the first time in five months during August. Price rises were mainly linked to increased input costs, according top panel members.

“The August PMI survey suggests that the UAE may be reaching capacity constraints that could put upward pressure on consumer inflation in the coming months. Input prices rose at the fastest rate since May 2012, both due to higher purchase prices for raw materials and rising staff costs. The backlogs of work also continued to rise in August, although at a slower rate than in July. Consequently, firms raised output prices for the first time since March 2014,” said Khatija Haque Head of Mena Research at Emirates NBD.

Data showed capacity pressures in the UAE’s non-oil producing private sector continued to build in August, with backlogs of work rising for a fourth straight month. Companies largely attributed the rise in work outstanding to large inflows of new orders. The rate at which work-in-hand increased eased from July’s survey high but remained sharp overall.

Survey results signalled a rise in employment levels in the UAE’s non-oil private sector. Firms continued to increase employment to support the higher workload. In line with the trends for output and new orders, purchasing activity increased in August.