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UAE business activity up

Issac John / 6 August 2012

Non-oil private sector business activity in the UAE continued to expand in July on the back of higher output volumes, HSBC Holdings said on Sunday.

The bank said its purchasing managers index, or PMI, rose slightly to 53.4 in July from 53.2 in June. A reading above the neutral 50 level indicates the economy is expanding.

“Although the sharp drop in export orders is troubling, overall the data suggests the non-oil economy is showing some resilience,” said Simon Williams, HSBC chief economist for the Middle East and North Africa.

“The headline score is still firmly in expansionary territory, and the positive output, new order and employment readings are particularly encouraging given the troubled global economy and the onset of the Gulf summer,” said Williams. Other key findings of the survey showed thatdomestic market conditions remained positive, but foreign demand showed signs of slowing. Employment registered the sharpest rise since April 2011. Operating costs rose at slowest rate for 18 months while output charges rose slightly.

“New order volumes continued to increase sharply during July, with the rate of growth unchanged on the previous month at 58.4 points,” the bank said.

There were reports of a positive demand environment, particularly at home. A rise in export sales was again recorded during July, but the increase was marginal and the weakest since June 2010, the report said.

UAE firms saw output growth slow again to 53.7 points in July, the weakest level since March, from 54.6 in June.

Growth in new export orders fell steeply to 50.6 points, the slowest rate since June 2010, from 54.5 in the previous month, with firms saying sales were increasingly difficult to secure in line with tougher operating conditions abroad.

The survey indicated another increase of output volumes in the UAE’s non-oil private sector economy. Growth has now been recorded throughout the past 2-1/2 years, although the latest increase was the slowest since March.

“With sales continuing to rise at a stronger pace than production, there was again evidence of capacity pressures. Backlogs rose for a fifth successive month, albeit only marginally and at the weakest pace since March,” the report said.

“As workloads increased and companies retained positive expectations for growth, payroll numbers rose again in July. Employment has now rise for seven successive months and latest data showed the continuation of the recent acceleration in growth, with staffing levels in July rising to the greatest degree since April 2011,” the bank said.

“Forecasts for growth encouraged companies to boost their purchasing activity in July, with the survey signalling another solid increase in input buying. Stocks were subsequently raised to the greatest degree for over a year,” the report said.


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