Undeterred by lower oil prices, the UAE continued to witness growth by recording a surge in new orders as job creation hit a three-month high in May, Crédit Agricole Private Banking said on Monday.
Along with the UAE, Saudi Arabia's output and new orders also expanded, but the growth rate of the Kingdom eased, said Crédit Agricole report, ‘Macro Comment — Mena Update'.
"Interestingly in the UAE, once again, new orders and new export orders reflected strong growth, while job creation hit a three-month high. This is reflected in the UAE's non-oil private sector PMI (purchasing managers index) which did not decline significantly in May (56.4) compared to 56.8 in April. On the other hand, input costs rose, contrasting with a slight decline in output prices charged by companies,” the bank said.
The bank noted that it is too early to infer from this latest change that a downward trend in the CPI (consumer price index) indices has started.
"We can see that the UAE's CPI was up 4.2 per cent year-on-year in April, which is the same as in Dubai where inflation can be an issue. Nevertheless, we can say that the UAE is yet to fully feel the pinch of the lower oil price across its relatively diversified economy in comparison to GCC peers,” said Dr Paul Wetterwald, chief economist, Crédit Agricole Private Banking.
"Similarly in Saudi Arabia, output and new orders expanded, but the rate of growth and pace of job creation eased somewhat during the month. It was interesting to note that the Kingdom's headline PMI last month (57.0) was at its lowest level since May 2014. While the most recent data in the PMI series still depicts a growing non-oil private sector economy, our estimate of growth in Saudi Arabia is more conservative,” said Wetterwald.
"For example, based inter alia on the latest Saudi Arabia Monetary Authority statistics, we get a Q1 2015 nominal GDP growth estimate.”
According to Wetterwald, the recent softening of world food prices should bring significant benefits to GCC consumers. This is indicated by the Food and Agriculture Organisation (FAO) food price index in May 2015, which was down 20.7 per cent year-over-year and 1.4 per cent month-on-month.
Crédit Agricole's observation on the UAE and Saudi Arabian growth has been complemented by data from HSBC's PMI survey. According to HSBC data, private sector business conditions and sentiment in the UAE and Saudi Arabia continue to be largely unaffected by falling oil prices.
The UAE's non-oil private sector continued to record robust growth in May even though the headline index dipped to 56.4 from 56.8 in April. Saudi Arabia's headline PMI fell to 57 in May from 58.3 in April, but it indicated another robust improvement in business conditions, said Markit Economics, which carried out the survey.