Dubai: The UAE’s purchasing managers’ index (PMI), a composite indicator of the performance of the non-oil private sector recorded a level of 53.8 in in October, unchanged from the September level.
The index, compiled by HSBC Holdings and Markit Economics signalled a solid improvement in operating conditions during the latest survey period reflecting optimistic sentiment; output was up moderately, despite robust expansions in new orders.
At 53.8, unchanged from September, Output at UAE non-oil private sector firms increased at a solid rate during October. Moreover, the rate of growth was at a similar pace to September. The increased level of production was driven by marked growth of new orders. Anecdotal evidence linked the increase in incoming new work to greater demand, particularly in international markets.
“It’s another solid reading that shows the UAE economy continuing to perform well, despite the poor global environment. The strong new orders numbers are particularly encouraging as is the modest gain in employment. We have no breakdown between Dubai and Abu Dhabi in the data, but I suspect the former is outpacing the latter at present,” said Simon Williams, Chief Economist for Middle East & North Africa at HSBC.
Backlogs of work increased marginally during October, following a modest reduction in September. A number of panellsts attributed the rise of backlogged work to an increased volume of new business. Meanwhile, there was a further rise in employment levels at non-oil private sector firms in October. The rate of job creation was slightly faster than in September, quickening to a three-month high.
Purchasing activity grew at the fastest rate since June, with a number of firms attributing this to higher production requirements. Stocks of purchases also increased during October. The rate of inventory accumulation was marginally faster than in September, but continued to be modest nonetheless.
“Total new orders continued to grow strongly last month, mainly on the back of improvement in demand from international markets. This was reflected in faster growth of new export orders, which expanded at the fastest rate since May 2011. As was the case in Saudi Arabia, we believe the improvement in external demand was likely within the GCC region,” Emirates NBD said in a note.
Suppliers’ delivery times improved further during October, although the rate of improvement was slightly down from that recorded in September. Survey respondents mentioned requests for faster delivery times had driven the improvement in vendor performance.
Overall input prices increased at a solid rate in October, with both purchase prices and staffing costs having risen since September. The greatest increase was for purchases, with average salaries rising only marginally over the month. The rate of job creation was slightly faster than in September, but remained modest overall. Nearly 9 per cent of respondents recorded an expansion of workforce numbers, with a number of firms attributing the higher staffing levels to greater production requirements.
Employment growth picked up in October, although the increase in staff costs was modest. Input prices rose again in October, but at a much slower rate than we have seen in previous months. Output prices rose more slowly than input prices, showing that producer margins remain under pressure.
