UAE Sept business conditions best in 10 months

UAE Sept business conditions best in 10 months

Private sector employment is up, along with new orders and production growth, according to new stats. Meanwhile, inflation is being held at bay.

October 5, 2010 2:18 by Reuters

Private sector business activity in the United Arab Emirates hit a 10-month high in September and the outlook was boosted by Dubai World’s recent restructuring deal, a purchasing managers’ survey showed on Tuesday.

The HSBC UAE Purchasing Managers’ Index (PMI), which measures the performance of the OPEC member’s manufacturing sector, rose to 52.6 points in September, holding above the 50 point level separates growth from contraction and up from 52.1 in August.

“The headline index is at its highest since November 2009 and it is encouraging that the gains in the score are being driven by growth in both current output and in new orders,” said Simon Williams, chief economist for MENA at HSBC in Dubai.

“Recovery has come late to the UAE and the pace still looks muted, but the survey strongly suggests that the economic environment has normalised and growth is underway,” he said.

In a Reuters poll last week, analysts raised their forecasts for UAE economic growth this year to 2.4 percent, from 2.1 percent in a poll in June after state-owned Dubai World sealed a $24.9 billion deal with most of its creditors, easing concerns about continued fallout from Dubai’s debt crisis.

Output growth at UAE private sector firms picked up in September, with the PMI output subindex rising to 54.6 points, its highest since April.

The new orders subindex rose to 53.8 points, a nine-month high, which panellists linked to better economic conditions, the survey of 400 private sector firms showed.

Companies said demand from Saudi Arabia and Qatar in particular had improved.

UAE firms also hired staff and stepped up buying activity in September.

Input price inflation accelerated slightly last month, which firms linked to higher raw material prices, transportation costs and unfavourable exchange rates.

However, input inflation remained modest by the historical standards of the series, which began in August 2009, the data showed.

Personnel costs rose marginally and by a slower pace than in August.

“The September readings also support our view that, despite the Ramadan-related pick-up in consumer prices, the underlying inflationary dynamic in the UAE is weak,” Williams said.

“Although input costs picked up modestly, output prices were stagnant, wages remained flat and the economy continued to show signs of carrying significant spare capacity,” he said.