Dubai: The UAE’s purchasing managers’ index (PMI) for February gained to 57.3 from 57.1 in January, signalling further solid expansions in output and new orders at the UAE’s non-oil private sector companies.
The index, compiled by HSBC and Markit Economics is a composite indicator of UAE’s non-oil economy based on data compiled from purchasing executives in approximately 400 private sector companies in the UAE.
The PMI data for February showed new export business rose at the quickest pace in the survey history and input costs increased at the slowest pace for six months. The data also showed that new export orders increased at the fastest pace since data collection began in August 2009, with more than one-in-four panelists reporting strengthening demand from foreign markets.
Sweet spot
“Output growth is strong, new orders are rising and employment is gaining speed so far without driving up prices. This is a sweet spot in the UAE’s economic cycle,” said Simon Williams, Chief Economist for Middle East & North Africa at HSBC.
The latest survey results provided evidence of pressure on operating capacity, as increased inflows of new work led to a further accumulation of backlogs during February. Work-in-hand has now risen for seven months running, with the rate of increase the second-quickest in that sequence. More than 12 per cent of the panel reported higher backlogs, while 7 per cent indicated a decline.
Output prices charged by firms in the UAE rose for a third month in succession during February, although only marginally. While around 3 per cent of panel companies raised their selling prices, the vast majority reported no change in charges. Where increased output prices were reported, panellists linked this to higher input costs.
The seasonally adjusted Input Prices Index posted above the neutral 50 threshold in February to signal ongoing cost pressures in the UAE’s non-oil private sector. However, input cost inflation eased to a six-month low, as both purchase prices and staff costs increased at slower rates than in January.
Average staff costs continued to increase in February, but the latest rate of wage inflation was only marginal and the slowest in just over two years, as the vast majority of the survey panel reported unchanged staff costs. Where companies indicated higher salaries, they linked this to increased living costs.
“Overall, firms appeared to be optimistic about activity going forward, and increased buying activity and inventory last month in anticipation of new orders. The PMI data for the first two months of 2014 supports our view that the non-oil sectors will be the main driver of overall GDP growth in the UAE this year,” said Khatija Haque, Head of Mena Research at Emirates NBD.
Employment levels in the UAE’s non-oil private sector rose further in February, as companies reported increased volumes of new work. The rate of job creation was the highest in three months. Meanwhile, increased demand put pressure on operating capacity in the sector, resulting in a further rise in backlogs.
