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UAE's private businesses make a rush to place orders

Spike in Q4-17 activity has much to do so with strategic buying before VAT kicks in

Image Credit: Gulf News Archive
The UAE government is set to implement a value added tax (VAT) in the country from January 1, 2018.

Dubai: The UAE's private sector churned out its best performance since August, with "steep" gains in November posted both in output and new deals generation.

This led businesses to engage in new investments — and they now expect further improvements in operating conditions over the next 12 months. 

Purchasing activity grew at record pace since the survey began in 2009.

There could also be an element of buying before the VAT costs come into effect. Plus, new employment generation continues to lag, according to Khatija Haque, Head of MENA Research at Emirates NBD.

“The PMI (purchasing managers index) reading for November confirms our view that the UAE’s non-oil sector will likely see strong growth in the fourth quarter of this year, as both households and business will likely boost purchases before VAT comes into effect at the start of next year," said Haque.

Softness in employment

"However, the continued softness in employment and lack of wage growth suggests that any boost to household consumption this quarter will likely prove temporary.”

The seasonally-adjusted Emirates NBD UAE PMI rose to 57 in November, up from 55.9.

The latest expansion was also above the series' long-run average.

In terms of inflation, average cost burdens rose at a solid pace, partly reflecting higher raw material prices.

The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the UAE's non-oil private sector.

Price front

On the price front, selling prices continued to fall for a third month running in November.

"The rate of discounting was moderate overall and slower than that registered in the previous survey," according to the Index.

Firms had also reduced output charges to stimulate client demand, the survey showed.

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