UAE private sector business activity at fastest pace in five years
Business activity in the UAE’s private sector quickened at its fastest pace last month in at least five years, according to the latest purchasing managers’ index data.
The PMI gauge, which measures monthly output across non-oil manufacturing and services, showed growth reached 58.3 points, the second strongest reading among the emerging markets HSBC covers in its data. Saudi Arabia’s score was marginally higher at 58.5. A reading above 50 indicates expansion.
“The UAE economy is in full swing, led by booming Dubai,” said Simon Williams, chief economist for the Middle East and North Africa at HSBC. “The risks of overheating will come sooner rather than later, but for now the UAE is in the sweet spot of its economic cycle – strong growth, firm employment and inflation that is only starting to rise.”
Signs of faster than expected momentum in the non-oil economy have prompted the IMF to upgrade its 2014 forecast for the UAE. It will be the third revision to its forecast this year.
Harald Finger, the official leading a mission to the UAE, said yesterday the IMF would change its current 4.4 per cent GDP outlook.
“Since we see strength in the economy it certainly looks like we will revise our projection,” said Mr Finger, deputy division chief of the regional studies division at the IMF’s Middle East and Central Asia department.
The IMF in late January lifted its forecast for both last year and this year to 4.5 per cent, before trimming it slightly to 4.4 per cent last month.
Buttressing recent growth in the non-oil sector has been surging visitor numbers to the UAE’s airports and hotels, as well as a run-up in prices within the equity and property markets.
Last month’s PMI reading was the highest in the 57-month survey history. Fuelling the uptick was a rise in output and new orders. New export orders accelerated from the month before, with respondents citing Middle Eastern countries and China as sources of growth.
Companies hired more staff too. The index’s employment gauge rose to its highest level since December 2009. Staff costs also picked up, contributing to higher overall input costs.
However, the index showed that the higher costs firms are paying are still only partly being passed on to consumers. Companies lowered their output prices for the first time in five months, with respondents citing competitive market conditions.
In its regional update report, released yesterday, the IMF forecast inflation within the GCC to rise from 2.9 per cent last year to 3 per cent this year.
The Institute of International Finance said on Monday that it expected inflation to reach 3.6 per cent by the end of the year as higher rental costs pushed up inflationary pressures.
Published: May 6, 2014 04:00 AM