UAE non-oil sector rebounds

Dubai - Sharper rise in output, solid improvement in business conditions give lift

The UAE's non-oil private sector expansion regained momentum in November after easing to a two-and-a-half year low during October, a survey revealed on Monday.
On the back of a marked and sharper rise in output, business conditions improved solidly in November, said the survey by Emirates NBD and produced by Markit.
New business and employment in the non-oil private sector also increased, although growth in business was the weakest since April 2012. "Companies saw their pricing power diminish in November. Input costs rose further, but competitive pressures meant that charges fell regardless," said the survey report.  
Khatija Haque, head of Mena research at Emirates NBD, said while the Emirates NBD PMI data points to slower non-oil growth in the UAE this year relative to 2014, it is important to recognise that the non-oil economy is still expanding at a solid rate despite the sustained weakness in oil prices, tighter liquidity conditions and increased uncertainty about government spending in the region as we head into 2016.

"The rebound in the November PMI, and particularly the strength of output and new order growth, is encouraging." 
UAE Minister of Economy Sultan bin Saeed Al Mansouri reaffirmed on Saturday that the UAE economy in a strong position to weather the drop in oil prices. In a statement, the minister said that oil prices have not affected the country's ongoing development plans and projects, in specific large and strategic projects, and projects for the development and renovation of infrastructure, the statement said.
According to the Emirates NBD survey, faster rise in activity underpinned healthier improvement in business conditions as rate of expansion in new orders remained solid, despite easing further.
The seasonally-adjusted Emirates NBD UAE Purchasing Managers' Index, which covers manufacturing and services, rose to 54.5 last month from 54.0 in October. A level above 50 indicates expansion. "At 54.5, the headline PMI - a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy - showed that the health of the economy strengthened midway through the fourth quarter. Up from October's recent low [54.0], the latest figure pointed to a solid improvement in business conditions. That said, the rate of growth remained much slower than that seen earlier this year and throughout 2014," said the report.
The bank said underlying data indicated that higher output was a key driver of the overall expansion. Activity rose more quickly in November, having previously increased at the slowest rate in two years during October. New business gains were behind rises in output, according to panelists.
"Though remaining marked, growth of new work failed to accelerate in November. In fact, the respective index dropped slightly to a 43-month low. Anecdotal evidence nevertheless pointed to new client wins resulting from better marketing, while data highlighted a second consecutive expansion in new export work. However, some firms suggested that new orders had been undermined by increased competition," the bank said.
"Non-oil private sector employment in the UAE continued to rise in November, thereby extending the current sequence of hiring to 47 months. The rate of job creation was the quickest since July, with firms reportedly taking on extra staff in preparation for the start-up of new projects. Backlogs of work also increased, albeit only marginally," Emirates NBD said.
While growth of buying activity picked up in line with output requirements during November, the expansion was the most marked in three months, and it contributed to another increase in stocks of purchases.
- issacjohn@khaleejtimes.com