Despite softening slightly in September, growth in the UAE’s non-oil private sector remained sharp and marked the strongest quarter recorded for two years, according to the latest UAE PMI survey.

It added, "The latest improvement in business conditions was driven by above-average expansions in both output and new orders. That said, new business from abroad slipped back to contraction, indicating that the recovery was driven by domestic demand. On the price front, output charges fell, whilst input price inflation softened to a four-month low."

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.

Commenting on the UAE PMI survey, Khatija Haque, Head of MENA Research at Emirates NBD, said, "Although the headline purchasing managers index eased slightly in September, the average reading for Q3 was the highest in two years, underpinned by strong growth in output and new work. The survey suggests that economic growth accelerated last quarter, and that domestic demand remains solid, despite relatively modest jobs growth."

The headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI), a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy, eased from the 30-month high of 57.3 recorded in the preceding survey to 55.1 in September. That said, growth remained strong overall and steeper than the survey’s historical average. The average in Q3 2017 was 56.1, the strongest since Q3 2015 (56.3).

Firms in the non-oil private sector reported a sharp increase in output in September. The rate of growth was steep overall and above the series’ long-run average. That said, the pace of expansion slowed from the four-month high registered in August.

Behind the latest rise in output requirements was strong underlying demand for goods and services produced in the UAE’s non-oil private sector, according to anecdotal evidence. A sharp expansion in incoming new work was signalled in September. However, survey data suggested that greater inflows of new work came from the domestic market instead of foreign sources, as indicated by the contraction in new export orders.

Employment levels continued to rise for the seventeenth month running in September. That said, job creation eased since August and was only slight overall.

Companies in the UAE’s non-oil private sector reduced their output charges according to the most recent survey data. Many panellists noted that they had dropped their selling prices to increase competitiveness.

Average cost burdens rose at the slowest pace for four months in September. The downtick was driven by softening pay pressures and slower input cost inflation.

Stocks of purchases rose at the second-fastest rate recorded in the survey’s history in September. Some respondents noted that they were stockpiling input goods in anticipation of rising output requirements.

An uptick in business confidence was also recorded in September. Hopes of an upturn in demand for goods and services produced in the UAE’s non-oil private sector underpinned optimism towards future growth. That said, business confidence remained subdued in the context of historical data.