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Record High Business Activity in October for UAE Private Sector

UAE : 03 November 2010

Business activity in the UAE’s private sector reached high levels not seen in 15 months.  Firms were also bringing in new staff and presenting a positive outlook for the region according to a recently released survey of purchasing managers.

Measuring the performance levels of the UAE’s manufacturing and service sectors, the HSBC UAE PMI (Purchasing Managers’ Index) climbed to 53.8 points in the month of October.  This was the highest point value seen since the beginning of the series and is an increase from September’s 52.6 level.  Any value above 50 indicates growth as opposed to contraction in an economy.

MENA’s chief economist at the HSBC Bank located in Dubai, Simon Williams, stated that these figures confirm their view that recovery is underway in the UAE.

Williams noted that momentum is not expected to rapidly increase and the spare capacities in the UAE economy remain a concern.

A recent Reuters poll saw an increase in forecasts made by analysts, who now put growth in the UAE at 2.4 per cent for 2010.  The rise is mainly due to the restructuring deal that Dubai World sealed to handle $24.9 billion in debt and ease concerns across the market.

The PMI survey also recorded a record high in the output sub-index which focuses on the non-oil private industry in the UAE.  That sub-index recorded the quickest rise since August of 2009 and reached 57.9 points last month.

Rising to 55.6 points, the new orders index enjoyed a high not seen in eleven months mainly thanks to higher levels of ordering and the reduction in backlogs.  The survey covers 400 companies in the private sector.

Figures showed that domestic demand is stronger than the demand for exports, as indicated by moderated growth data in new export orders over September’s figures.

There was moderate growth evident in both employment and buying activities, but slower job creation recorded for the month.

As the cost of raw materials rose and wages inflated at a rising pace, businesses experienced increasing input costs throughout October as reported in the survey.

Output prices rose slightly as the private industries within the UAE passed on a portion of the higher costs to the public.

In Saudi Arabia activity within the non-oil private industry experienced rapid growth in October, the quickest pace in 12 weeks.  This activity indicates that the largest economy in the Arab world is on the rise.

The HSBC Saudi Arabia PMI climbed to 59.9 last month, up from September’s figure of 58.5 points and reaching the highest level seen since July.  Saudi’s manufacturing and service sectors were measured in the survey.

Williams noted that these are positive figures that indicate output growth are likely to continue gaining ground over the last quarter and into the following year.

The seasonally adjusted composite index capped in June hitting 61.4 points.  This current survey began in August of last year.

Private industries in the largest oil producing nation around the globe have seen solid growth throughout October due to rising rates of new orders in the time period between July and October.  New exports slowed down in the same time period, reaching the lowest levels in the survey’s coverage.

Because purchasing costs and salaries have rapidly increased in the last month, many businesses were forced to hike prices, as reported by the survey that covers over 400 private businesses.

September’s consumer inflation figure hit 5.9 per cent and is still a concern.  The rate has decreased from an 18-month maximum, but it remains the highest in the GCC region.

Williams stated that the survey results could spell trouble for inflation, as input costs increase and based on the strength of the market, businesses are able to pass those costs on to consumers.

Employment in Saudi Arabia rose to a high point in October, the highest in four months, which is an indication of healthy job creation outside of the oil and public sectors.

Saudi Arabia has a jobless rate of 10 per cent and the kingdom’s government is pushing for growth within the private sector and encouraging job creation for the rising population which has surpassed 18 million.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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