Business conditions in the UAE’s non-oil private sector improved in January after slipping to a four-month low in the previous month on “a robust rise in new orders,” a purchasing managers’ survey showed on Sunday.
The HSBC UAE Purchasing Managers’ Index, which measures the performance of the manufacturing and services sectors, increased to 52.4 points last month from 51.7 in December. The adjusted index remains above the 50-point mark, which separates growth from contraction, the survey of 400 private sector firms showed. “The headline number points to greater stability after a run of declines and it is encouraging to see the uptick in new orders,” said Simon Williams, chief economist for the Middle East and North Africa at HSBC.
“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.”
The PMI showed that non-oil producing firms recorded a marked 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 during January. The increase was slower than for overall new business, however, as survey members reported that purchasing activity of European customers remained subdued.”
UAE firms saw a robust rise in new orders at the start of 2012, reaching 57.5 points in January after a fall to a four-month low of 56 in December. Non-oil private sector companies registered a solid increase in output in January, the data showed: the second fastest 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,” the survey showed.
New export orders accelerated in January for the first time in four months, though survey participants reported that the purchasing activity of European customers remained subdued. Overall input price pressures eased for the second successive month to the slowest rate recorded in the last 11 months, the survey showed.
According to the survey, vendor performance continued to improve during January. “While the seasonally adjusted Suppliers’ Delivery Times Index fell slightly from December’s 20-month high, it remained considerably above the average for 2011, indicating that lead times were reduced at a strong pace. Almost 13 per cent of survey members reported faster delivery times from suppliers than in December, while less than two per cent recorded a slowing.”
A poll of economists in December estimated gross domestic product grew 3.9 per cent in 2011 and would expand 3.1 per cent this year. In 2011, UAE inflation remained at 0.9 per cent on average, the lowest rate since 1990.
In January, non-oil producing companies in the UAE increased headcounts at only a marginal rate. Most firms appeared reluctant to increase staff levels at their business units as cost pressures remained strong.