Growth in the UAE non-oil private sector economy climbed to the fastest pace seen since February 2015, bolstered by sharp expansions in new orders and output, according to the latest UAE PMI survey.

The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector, and says that new export orders rose for the first time in three months, with other GCC countries being mentioned as key sources of international demand. The ongoing upturn in new business translated into job creation across the non-oil private sector, while increasing output requirements prompted firms to engage in purchasing activity, which contributed to a record rise in inventories. Meanwhile, firms continued to face upward cost pressures. In contrast, output charges stabilised during August.

Commenting on the survey, Khatija Haque, Head of MENA Research at Emirates NBD, said, "The August PMI survey shows a strong expansion in the non-oil private sector, underpinned by sharply higher output, new orders and inventories. Firms have indicated that new projects and competitive pricing are supporting demand and activity in the non-oil sector. This is in line with our view that investment ahead of Expo 2020 will be the key driver of the UAE’s non-oil growth over the next few years."

The headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index is a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy. It climbed to a 30-month high of 57.3 in August from 56.0 in July. In addition, the overall upturn in the non-oil private sector outperformed the long-run average.

The improvement in business conditions was driven by an increase in new orders. Moreover, the rate of growth was the sharpest in 30 months. Firms frequently linked new client wins to new projects, enhanced marketing initiatives and good quality products.

A sharp rise in business activity also contributed to the overall improvement in the UAE’s non-oil private sector. Where an increase was registered, firms commented on favourable economic conditions.

New export orders rose for the first time in three months. The rate of growth was marginal, however. Surveyed companies cited other GCC countries as key sources of international demand.

The ongoing upturn in new business continued to translate into job creation during August. The rate of expansion was only marginal, however.

Companies engaged in purchasing activity during August, in response to greater output requirements. Consequently, inventories held by firms rose at the most pronounced rate in the survey’s history. This reflected firms’ forecasts of further improvements in market demand, according to panellists.

On the downside, firms continued to face intense input cost pressures, which mainly emanated from higher purchasing costs according to underlying data. In contrast, output charges stabilised during August as firms were reportedly unable to pass on higher cost burdens amid intensive competition. This ended a four-month sequence of falling output prices, however.

Lastly, business sentiment remained positive despite dipping to the lowest in three months. Business confidence was rooted in projections of further improvements in market demand and economic conditions.