Sharp rise in new orders

The index shows Uae’s new orders rose solidly in December, with 41 per cent of panel members indicating growth. — Kt file photo

A sharp rise in new orders boosted the business activity of the UAE’s non-oil producing private sector, at its quickest pace in more than two-and-a-half years, according to HSBC’s Purchasing Managers’ Index for the month of December.

Operating conditions in the UAE continued to improve in the final month of the year, with the headline index posting 57.4. The latest reading was down slightly from November’s record high of 58.1, but rounded off the best quarter in the series history.

Business activity in the UAE’s non-oil producing private sector rose at the fastest pace since April 2011 during December, with companies commenting on increased order intakes.

The output index was higher than November and exceeded 60 for the first time last month. New orders growth eased slightly to a still-strong 65.2, and export orders eased as well. The backlog of work continued to rise in December, as companies struggled to process strong new order growth, but employment growth was slightly slower last month compared with November.

The index shows new orders also rose solidly, with 41 per cent of panel members indicating growth. The pace of expansion eased slightly from November’s record high, but was the second-quickest in the series history. Survey respondents linked the latest rise to increased sales team efforts, good economic conditions and higher construction activity. Meanwhile, new export orders rose at the slowest pace in four survey periods. Backlogs of work accumulated at the quickest pace since data collection began in August 2009 in December, as companies struggled to process the sharp growth of new work. Cost pressures persisted into December, with 12 per cent of panel members reporting higher input prices. While purchase prices rose at the fastest pace in over a year, wage inflation was unchanged since November.

In response to higher input costs, the UAE’s non-oil producing private sector firms raised their charges in December. The increase in selling prices followed two months of price reductions.

“We expect output prices to continue to rise modestly through 2014, as margins have been under pressure for several years. Overall, the PMI data through 2013 has painted a picture of recovering domestic demand and faster growth in the non-oil sectors of the UAE,” Emirates NBD said in a research note on Monday.

In line with increased activity and new orders, staffing levels rose in December. While the rate of job creation eased since the previous month, the increase remained above the long-run series average. Anecdotal evidence suggested that higher employment levels were driven by increased workloads.

The latest survey data signalled a further rise in buying activity at the UAE’s non-oil producing private sector firms, with the rate of expansion down only fractionally from November’s record high. Meanwhile, stocks of purchases accumulated, with companies commenting on higher new business. That said, the latest rise in input stocks was the weakest in three months.