Record new exports lifted the UAE’s private sector last month as the economy sits in a “sweet spot”, said HSBC’s chief economist for the region.
“Output growth is strong, new export orders are rising and employment is gaining speed, so far without driving up prices,” Simon Williams, the bank’s chief economist for the Middle East and North Africa, said yesterday. “This is a sweet spot in the UAE’s economic cycle.”
The bank’s purchasing managers’ index headline reading, measuring activity among non-oil businesses, nudged up to 57.3 points last month, up from 57.1 the month before. A reading above 50 signals growth, with a reading a below indicating contraction.
Minister of Economy Sultan Al Mansouri forecast last month the economy would expand by between 4.5 and 5 per cent this year. The robust outlook reflects accelerating activity in trade, tourism, manufacturing and logistics, as well as a rebound in the property segment.
The steadily improving outlook has been captured in the PMI data, which has recorded growth across 54 months. Last month, new export business rose at the quickest pace in the history of the series, which started in August 2009. More than a quarter of panellists reported strengthening demand from foreign markets.
Overall order intakes rose markedly, although at a marginally slower pace than in January. The growth in orders pushed output expansion higher, falling short of December’s 32-month high.
It also pushed firms’ backlog of work higher, nudging employment up as firms hired more staff to meet demand. Employment has now risen for 26 months in a row.
“Overall, firms appeared to be optimistic about activity going forward, and increased buying activity and inventory last month in anticipation of new orders,” wrote Khatija Haque, a senior economist for the GCC at Emirates NBD, in a research note. “The PMI data for the first two months of 2014 supports our view that the non-oil sectors will be the main driver of overall GDP growth in the UAE this year.”
Even as activity quickened last month, companies’ cost burdens remained relatively muted. Overall costs rose, although to the weakest extent since last August as both purchase prices and staff costs grew at slower rates. Companies slightly raised output charges.
In Saudi Arabia, the headline PMI eased to a three-month low of 58.6 last month. But the output index remained above the 60 threshold as new orders stayed robust. Export orders quickened at their fastest pace in four months.
tarnold@thenational.ae
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