Source: Gulf News
The UAE’s purchasing managers’ index (PMI), a composite indicator of the performance of the non-oil private sector, increased from 51.7 in December to 52.4 in January.
The index, compiled by HSBC Holdings and Markit Economics, signalled stronger private sector growth in the UAE,
Registering above the 50 mark that separates growth from contraction, the latest reading was in line with the average recorded during the second half of last year.
“The headline number points to greater stability after a run of declines and it’s encouraging to see the uptick in new orders,” said Simon Williams, chief economist for Middle East and North Africa at HSBC.
Business conditions in the UAE’s non-oil private sector improved at an accelerated rate in January, following a slight weakening at the end of 2011. The strengthening in the health of the sector was moderate, as the expansion in output quickened and new business rose at a marked pace. Hiring remained sluggish, however, as firms remained cautious of adding to cost pressures. Non-oil producing firms recorded a significant rise in overall new orders at the start of 2012. The rate of growth in total new business accelerated over the survey period to a three-month high.
An expansion in new export orders was also registered in January. The increase was slower than for overall new business, however, as survey members reported that purchasing by European customers remained subdued.
In response to the rise in new work, firms increased activity in January. Output growth by the UAE’s non-oil producing companies accelerated to a solid rate, the second-quickest recorded in the last six months. Efficient order processing and quicker delivery times from suppliers helped to reduce outstanding business held by companies over the month. Vendor performance improved considerably, with lead times shortening at their second-sharpest rate in 21 months.
“Greater production requirements encouraged businesses to increase purchasing activity in January. The expansion in input buying was solid, and quickened to the fastest pace since July 2011.
“However, greater purchasing activity did not translate into a rise in pre-production stocks,” HSBC said.
The survey showed non-oil producing companies in the UAE increased headcounts at only a marginal rate in January. Most firms appeared reluctant to increase staff levels as cost pressures remained strong.
“Employment still looks soft, though, and continued weak output prices despite further gains in costs suggests there continues to be significant spare capacity in the domestic economy,” said Williams.