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UAE gets reality check with May’s dip in business -study

UAE gets reality check with May’s dip in business -study

So far the UAE has seen a cash flow rush with the regional unrest. Last month, however, registered job creation slowdown and a weak purchase price inflation, says HSBC study.


June 5, 2011 11:22 by

Private sector business activity in the UAE slowed in May from a series high seen in the previous month as both new orders and output decelerated, a purchasing managers’ survey showed on Sunday.

The HSBC UAE Purchasing Managers’ Index (PMI), which measures the performance of the OPEC member’s manufacturing and services sectors, fell to 56.0 points in May. It stood at 57.5 points in April, which was the highest level since the series began in August 2009, with 50 marking the point separating growth from contraction. Four hundred private sector firms take part in the survey.

“There is still a raft of problems for the UAE economy to work through and the lower PMI print for May is a reality check for those that thought we were rushing back to the strong growth rates of earlier years,” said Simon Williams, chief economist for MENA at HSBC. “But it is still a decent reading. We continue to look for non-oil growth of around 3 percent this year, with the economies of both Dubai and Abu Dhabi expanding year-on-year,” he said.

The UAE, the world’s No.3 oil exporter, became an investor safe haven over the past few months with pro-democracy protests sweeping through much of the Arab world, including nearby Oman, Bahrain and Yemen.

However, UAE member Dubai and its firms need to repay about $30 billion in loans and bonds over the next two years, while a total debt burden of the emirate is estimated at $115 billion or 144 percent of its economic output.

Analysts polled by Reuters in March expected the UAE economy to expand by 3.4 percent this year, after 1.4 percent in 2010.

UAE firms raised buying activity, built up input stocks and took on extra staff in May, the survey showed. Purchasing increased at a series record pace, supporting another robust rise in inventories.

Job creation in the OPEC member slowed on the month in May, but remained solid.

Purchase price inflation moderated in May, but remained sharp with 26 percent of panelists registering a rise in purchasing costs. Anecdotal evidence suggested that greater fuel, raw material and freight costs drove the latest increase.

Annual consumer price inflation in the UAE, the second largest Arab economy, decelerated to 1.1 percent in April on a drop in housing costs. (Reporting by Martin Dokoupil; Editing by Stephen Nisbet)


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