The UAE Purchasing Managers' Index, for three months ending September 30 was 56.1, the strongest since the third quarter of 2015 on the back of strong growth in output and new work. Sarah Dea / The National
The UAE Purchasing Managers' Index, for three months ending September 30 was 56.1, the strongest since the third quarter of 2015 on the back of strong growth in output and new work. Sarah Dea / The NaShow more

UAE sees strongest third quarter of non-oil activity in two years



Non-oil business activity in the UAE had the strongest third quarter in two years on the back of strong growth in output and jobs, a key economic gauge for the second biggest Arabian Gulf economy showed.  

The UAE Purchasing Managers' Index, sponsored by Emirates NBD and produced by IHS market, showed the average PMI for three months ending September 30 was 56.1, the strongest since the third quarter of 2015, when it was at 56.3. For the month of September gauge slowed to 55.1 from 57.3 in August as the pace of expansion dipped from the four-month high in August.  

"Although the headline purchasing managers index eased slightly in September, the average reading for the third quarter was the highest in two years, underpinned by strong growth in output and new work," said Khatija Haque, the head of Middle East and North Africa research at Emirates NBD.  

"The survey suggests that economic growth accelerated last quarter, and that domestic demand remains solid, despite relatively modest jobs growth."  

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While there was a decrease in new orders from abroad, the data suggested orders from the domestic market rose. Meanwhile, the level of employment continued to rise in September, the 17th month in succession, even though it eased slightly in August. As in previous months this year, companies said that they had dropped selling prices to attract buyers.  

The UAE's non-oil economy, which has been subject to lower growth in recent years, is set to get a boost from a pick-up in government spending ahead of Expo 2020. 

Economists also say that an improvement in the global economy is aiding tourism and real estate. The global economy is forecast to grow 3.5 per cent this year before accelerating to 3.7 per cent in 2018, the best rate since 2011, according to the OECD.

Consumer confidence, which has also been improving in the UAE, is set to get a lift from the introduction of a value added tax as people buy durable goods before the 5 per cent levy is introduced on January 1, 2018. 

Non-oil GDP is forecast to ­expand by 3.3 per cent this year from 2.7 per cent last year, the IMF said in May. Abu Dhabi Commercial Bank and Standard Chartered, the emerging market specialist lender based in London, are both forecasting that the non-oil economy will grow 3.2 per cent this year compared to 2.7 per cent last year. 

In Saudi Arabia, the Arab world's largest economy, the kingdom's PMI, also sponsored by Emirates NBD and undertaken by IHS Market, slipped to 55.5 in September from 55.8 in August. Even though the rate of expansion slowed, those surveyed said there is strong underlying demand as firms, like those in the UAE, reduced selling prices to boost sales. 

"The PMI for Saudi Arabia has been relatively stable in the third quarter, signalling a solid expansion in non-oil sector growth last quarter," Ms. Haque said. 

"While output and new order growth has remained strong, external demand was softer compared to a year ago, as was employment growth. The announcement of key reforms and a successful US$12 billion debt issue in late September should have a positive impact on both sentiment and business activity in the coming weeks." 

Firms polled by the IHS said that they anticipated an uptick in business activity in the next 12 months. 

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Financial considerations before buying a property

Buyers should try to pay as much in cash as possible for a property, limiting the mortgage value to as little as they can afford. This means they not only pay less in interest but their monthly costs are also reduced. Ideally, the monthly mortgage payment should not exceed 20 per cent of the purchaser’s total household income, says Carol Glynn, founder of Conscious Finance Coaching.

“If it’s a rental property, plan for the property to have periods when it does not have a tenant. Ensure you have enough cash set aside to pay the mortgage and other costs during these periods, ideally at least six months,” she says. 

Also, shop around for the best mortgage interest rate. Understand the terms and conditions, especially what happens after any introductory periods, Ms Glynn adds.

Using a good mortgage broker is worth the investment to obtain the best rate available for a buyer’s needs and circumstances. A good mortgage broker will help the buyer understand the terms and conditions of the mortgage and make the purchasing process efficient and easier. 

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Fines for littering

In Dubai:

Dh200 for littering or spitting in the Dubai Metro

Dh500 for throwing cigarette butts or chewing gum on the floor, or littering from a vehicle. 
Dh1,000 for littering on a beach, spitting in public places, throwing a cigarette butt from a vehicle

In Sharjah and other emirates
Dh500 for littering - including cigarette butts and chewing gum - in public places and beaches in Sharjah
Dh2,000 for littering in Sharjah deserts
Dh500 for littering from a vehicle in Ras Al Khaimah
Dh1,000 for littering from a car in Abu Dhabi
Dh1,000 to Dh100,000 for dumping waste in residential or public areas in Al Ain
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