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UAE business activity at 15-month low

UAE business activity at 15-month low

New business growth at one-year low, job creation slows, according to survey.

September 7, 2011 3:08 by



Growth in private sector business activity in the UAE plunged to a 15-month low in August as output stagnated and new order growth dropped to the lowest pace in a year, a purchasing managers’ survey showed on Wednesday.

The HSBC UAE Purchasing Managers’ Index (PMI), which measures the performance of the OPEC member’s manufacturing and services sectors, dropped to 50.9 points in August, after easing for three consecutive months in a row to 53.3 points in July, the survey of 400 private sector firms showed.

The PMI had reached 57.5 points in April, which was the highest level since the series began in August 2009, with 50 marking the point which separates growth from contraction.

“It’s a disappointing reading that strongly suggests the pick up in growth apparent in the first half of the year has lost speed,” said Simon Williams, chief economist for MENA at HSBC.

New orders for UAE non-oil private sector companies hit a one-year low of 53.5 points in August.

This was reflected by firms’ output levels, which were unchanged on the month for the first time since the series began in August 2009, the survey showed.

The global financial crisis and a local debt crisis led to the shelving of projects worth billions of dollars in Dubai, a trade and financial hub of the UAE, dragging down the economy.

Concerns about indebtedness of Dubai’s state companies have eased after government-linked Dubai World sealed a deal to restructure almost $25 billion of debt a year ago, although uncertainty remains over the emirate’s ability to repay some $30 billion worth of debt due over the next two years.

“The marked drop in the new orders index, as well as the current output index, indicates that the deteriorating global environment is taking its toll,” Williams said.

Global growth in services came to a virtual standstill last month as new business all but dried up, adding to fears that the world economy is facing another recession.

Weak PMIs from the euro zone, China, India and Britain echoed surveys last week that showed world factory output slowed in August.

Job creation in the UAE has cooled sharply since a series’ record in April, but non-oil private sector companies continued to hire new staff in August citing business expansions and expectations of stronger market demand.

UAE non-oil private sector selling prices fell in August after eight successive months of output price inflation, while input cost pressures increased slightly, the survey showed.

“That output prices fell in August even though input costs continued to rise may be welcomed by consumers but underscores the difficulty firms face protecting their margins in an economy that still has substantial excess capacity,” Williams said.

Annual consumer price inflation in the UAE, the second largest Arab economy, eased to…

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