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 September, up from August’s 53.3.
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.
The headline seasonally adjusted HSBC United Arab Emirates PMI – a composite indicator designed to provide a single-figure snapshot of the performance of the non-oil private sector production levels expanded during September.
“It’s a positive reading that suggests the UAE is one of the few economies in the world where private sector growth is accelerating rather than losing pace. I’m still concerned by the UAE’s reliance on export demand, and by the rate of employment growth which is still slow,” said Simon Williams, Chief Economist for Middle East & North Africa at HSBC said.
The rate of growth was the quickest in three months and remained solid. Total new orders rose at the sharpest rate in 15 months. New export orders increased for the twenty-eighth month in a row, and at a marginally stronger rate than in August. Panellists linked higher new orders to improved market conditions and stronger client demand.
Backlogs of work in non-oil private sector firms fell for the first time since February. This reduction was only marginal, and many respondents reporting a fall linked this to increased productivity at their units. Meanwhile, there was a further, albeit modest, expansion of staffing levels at firms during September as companies responded to greater production requirements. Employment has now risen for the past nine months.
Purchasing activity at UAE non-oil private sector companies increased during September, and at the fastest rate since June. Inventories also continued to increase, albeit at a more modest pace than in August. Growth in purchases and stocks reflected increased production requirements, and expectations of higher demand.
On the price front, overall input prices continued to rise, though the rate of inflation eased slightly from August. Higher purchasing prices were the key driver of overall input price inflation as suppliers raised prices in line with higher demand for inputs. Staffing costs continued to increase in September, but inflation of wages in the latest survey was modest.
Average tariffs set by companies rose during September, following on from the slight decline in output charges of August. However, this increase was only marginal and much weaker than that seen for input prices.
The seasonally adjusted New Orders Index posted its highest reading since June 2011 in September, and was well above the series trend. Almost 36 per cent of survey respondents indicated an increase in new order volumes. Anecdotal evidence suggested that some companies attributed the increase in new business to improved market conditions, which led to stronger client demand.
“For now the economy is showing resilience and with new orders strengthening, there’s good reason to expect the UAE to maintain momentum into the year end,” said Williams.