News Column

UAE's non-oil sector activity jumps sharply

February 5, 2014

Survey respondents commented on increased marketing efforts and improving economic conditions in the country. Employment levels rose to a lesser extent in January than at the end of 2013 as non-oil producing private sector companies in the UAE reported a sharp but weaker rise in activity, according to the latest HSBC Purchasing Manager's Index report. Order intakes increased at a quick pace with around 43 per cent of companies reporting growth, the PMI, which tracks the economic health of the country's manufacturing sector, shows. The headline PMI fell slightly from December's 57.4 to 57.1 in January, signalling a further improvement in operating conditions in the UAE's non-oil producing private sector. "Operating conditions in the sector have now improved continuously on a monthly basis since September 2009 , with the latest reading among the highest seen in the survey's history," the report said. Survey respondents commented on increased marketing efforts and improving economic conditions in the country. New export demand also strengthened in January, with the rate of growth in new export work higher than seen in the previous survey period. Simon Williams , chief economist for Middle East and North Africa at HSBC , said the UAE has entered the year with strong growth while building momentum, even as some other emerging markets appear to be losing their way. "Inflationary pressures are building but this is a sweet spot in the UAE's economic cycle where rapid growth doesn't yet mean a surge in prices." In line with the trends for output and new orders, employment levels rose in January. Higher workload was the primary factor for hiring of additional workers, according to panelists, the HSBC report said. Payroll numbers have now risen for 25 consecutive months, although the latest increase was the weakest since August. The PMI report noted that backlogs of work continued to rise in January, providing evidence of capacity pressures at the UAE's non-oil private sector companies. On the price front, companies reported a further cost increase in January, said the report. "The rate of purchase price inflation accelerated for the sixth month in succession and was the steepest in nearly one-and-a-half years, with companies commenting on higher prices for raw materials and stronger market demand." Wage inflation eased to a six-month low, with the vast majority of the panel indicating unchanged salaries.The report noted that the sharp increase in inflows of new business resulted in a rise in purchasing activity at the UAE's non-oil producing private sector firms. Stocks of purchases accumulated further and at a slightly faster pace than seen in December. Moreover, the expansion was among the sharpest recorded in the four-and-a-half year survey history. The International Monetary Fund last week raised its 2014 growth forecast for the UAE to 4.5 per cent and said the economy would remain strong this year driven by an ongoing momentum in the non-oil economy. The real estate sector, the IMF noted, has seen a steep recovery. "While there will continue to be a momentum in the non-oil economy, further growth in oil production could be limited in the context of an amply supplied global oil market. Inflation is expected to increase moderately, driven by rising rents," the IMF said. issacjohn@khaleejtimes.com


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Source: Khaleej Times (United Arab Emirates)


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