Business activity at 11-month high

Growth in business activity in the United Arab Emirates' non-oil private sector edged up to an 11-month high in May, a purchasing managers' survey showed on Tuesday.

The HSBC UAE Purchasing Managers' Index, which measures the performance of the manufacturing and services sectors, increased to 53.8 points last month from 53.5 in April. The adjusted index remains above the 50-point mark which separates growth from contraction, the survey of 400 private sector firms showed.

"It's a good reading and, given the weakness PMIs are showing elsewhere in the world, the pick up in the new orders and employment scores is particularly encouraging," said Simon Williams, chief economist for the Middle East and North Africa at HSBC.

"The UAE's reliance on external demand and foreign funding, though, and the limited fiscal stimulus that's in place, mean it will be hard for the economy to continue to build momentum, particularly as we move into the hot summer months."

UAE firms saw output growth ease to 54.8 points in May from a 10-month high of 55.4 in April. But new orders advanced to an 11-month high of 59.1 points.

Employment across the UAE's non-oil private sector rose for a fifth month in a row, and at the sharpest pace since last July, the survey showed.

Rises in both salaries and purchasing costs led to a sharp increase in overall input price inflation to 57.0 points in May from 55.8 in the previous month.

Consumer price inflation in the UAE, one of the world's top five oil exporters, is forecast to climb to 2 percent this year from 0.9 percent in both 2011 and 2010, a Reuters poll of analysts showed in March.

Minister of Economy Sultan bin Saeed al-Mansouri on Monday cut his forecast for the country's gross domestic product growth this year, predicting expansion of around 3 percent instead of the "almost 4 percent" which he expected in March. Last year, the economy grew 4.2 percent.

Detailed PMI data is only available under license from Markit and customers need to apply to Markit for a license.

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