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29 March 2024

UAE October PMI at 15-month high

Economic activity is heading back to normalcy. (FILE)

Published
By Staff

Private sector business activity in the UAE hit a 15-month high in October and the outlook improved further with companies hiring new staff, according to the findings of a purchasing managers' survey.

The HSBC UAE Purchasing Managers' Index (PMI), which measures the performance of GCC countries’ manufacturing and services sectors, rose to 53.8 points in October for the UAE, its highest level since the series began, holding above the 50 point mark that separates growth from contraction. It stood at 52.6 in September.

"This is encouraging reading that supports our view that the UAE has shifted into recovery mode," said Simon Williams, chief economist for MENA at HSBC Bank in Dubai.
 
The new orders index rose to 55.6 points, an 11-month high, which panellists linked to higher order levels and further backlog depletion, the survey of 400 private sector firms showed.

“I don't expect momentum in the economy to build particularly quickly, and there are clear signs that the amount of spare capacity in the economy is worryingly high. The gains in new orders, though, offer strong grounds to expect the steady gains in output and labour demand to persist. We continue to look for real growth of around 2 percent this year, rising to around 3.5-4 percent in 2011,” he said.
 
The data indicated that domestic demand was firmer than external demand, as new export order growth moderated slightly from September.
Employment and buying activity both rose at moderate rates although job creation slowed on the month.
 
Business conditions faced by UAE companies in the non-oil producing private sector improved further at the start of the final quarter of 2010, the survey said.

For the ninth month in succession, firms registered higher output in October. Moreover, the latest increase was sharp and the fastest in the survey history. Underpinning the rise in activity levels was a faster expansion of new business, as well as a more pronounced depletion of backlogs.

Incoming new work increased markedly in October, which panellists linked to stronger demand, a better economic climate, successful advertising campaigns and improved competitiveness. Data indicated that domestic demand was firmer than external demand, as new export order growth moderated slightly since September.

Despite sharper gains in new orders, work-in-hand at UAE private sector companies continued to fall during the latest survey period. The latest reduction was solid and the fastest for three months. Reports suggested that efforts to improve efficiency were the main reason for lower outstanding business.

To accommodate higher demand for their goods and services, companies hired extra workers and acquired additional inputs in October.
Employment and buying activity both rose at moderate rates as a result. However, job creation slowed on the month. Growth of purchasing was not sufficient to build up input stocks, which fell modestly on the month.

Lead times on deliveries of raw materials and semi-finished goods to UAE private sector firms continued to shorten in October. However, the rate of improvement eased to a series record low, reflecting a sharper pick-up in demand for inputs.
 
The survey findings said input price pressures built further in October, largely driven by rising raw material costs, although wage inflation also accelerated slightly. UAE private sector companies passed on part of the growth in their cost burdens to customers by way of higher charges. That said, output price inflation was only slight.