Dubai: The Emirates NBD Purchasing Managers’ Index (PMI) for the UAE increased slightly in April to reach 55.1 (54.8 in March), indicating a solid rate of expansion in the non-oil private sector last month.

Data showed new order growth was strong (index at 60.8), with the increase in April underpinned by a rise in new export orders. The export order index stood at 52.9, the highest reading since December 2017, with respondents noting improving demand from the Middle East and Europe.

Output/Business activity also rose at the fastest rate since January, with this index at 58.4 in April. However, as has been the case for the last couple of years, strong output and new order growth has not translated into faster employment growth.

The improvement in business condition in the UAE in April was driven by strong output and new order growth, including a recovery in export orders. The rise in employment and selling prices, although modest, is also encouraging,” said Khatija Haque, Head of MENA Research at Emirates NBD.

Job growth continued to remain as the employment index rose to 50.7 in April from 50.3 in March, remaining below the series average. The average for the employment index year-to-date is just 50.9, indicating even weaker job growth in the UAE since the start of this year than in 2017. However, the backlogs of work increased the most since August 2015, largely due to higher new orders, which may lead some firms to boost hiring in the coming weeks.

April saw an improvement in new order books from both domestic and foreign sources. Internal demand for goods and services grew at a marked rate that was above the long-run average. Meanwhile, new business from abroad returned to growth in the latest survey, increasing at a moderate rate overall.

In terms of inflation, both input cost and output charges increased during April. Average cost burdens faced by non-oil private sector firms in the UAE increased at a moderate rate overall. Many respondents noted a general increase in operating costs, linked to rising raw material costs alongside higher staff wages. Responding to stronger demand conditions and greater cost burdens, firms raised their output charges for the first time since the start of the year. The rate of output price inflation was modest overall.

Purchasing activity rose at a similar rate to March, which was to be expected given strong new order growth. Stocks of pre-production inventories increased the slowest rate since May 2016 however, as firms had aggressively built up inventories in the fourth quarter of 2017 ahead of the value-added tax (VAT).

Businesses were more upbeat in April about future output, on average. More than half of the firms surveyed in April expected their output to be higher in 12 months’ time, compared with 28 per cent in March and less than 15 per cent in February. “An expected economic upturn, new product launches and improved marketing strategies were all cited as factors behind the positive sentiment last month. We believe higher oil prices have also contributed to positive sentiment in the private sector,” Haque said.