UAE's non-oil sector continues to grow strong

Published July 3rd, 2013 - 09:02 GMT
Zabeel Park, Dubai (Source: Wikimedia/Ranjit Laxman)
Zabeel Park, Dubai (Source: Wikimedia/Ranjit Laxman)

By Issac John

The HSBC purchasing managers’ index, or PMI, which measures the performance of the manufacturing and services sectors in the non-oil private sector economy, dropped to 54.1 in June from 55.3 in May. An index reading above 50 indicates expansion of the sector, while one below that suggests contraction.

“Payroll numbers rose solidly and the rate of wage inflation accelerated to the sharpest in the 47-month survey history,” the survey showed. The rates of expansion, however, eased from May. New business from foreign markets also expanded at a slower pace, the survey report said.

Consumer price inflation in the UAE edged up to one per cent on an annual basis in May. Activity, new orders, employment and stocks of purchases all improved, but only workforce numbers rose at an accelerated rate from the previous survey period, HSBC said in its report.

Simon Williams, chief economist for Middle East and North Africa at HSBC, said although the data showed a modest slowdown into the start of the hot summer months, the economy is still in growth mode with output still rising and employment gaining speed.

“The sharp slowdown in other emerging markets is a concern, but robust new orders figures suggest the UAE is likely to retain momentum for now, as strong domestic and regional demand compensates for weakness in Asia and beyond,” said Williams.

The International Monetary Fund said last month that non-oil economic growth in the UAE is expected to strengthen further in 2013 on the back of a broadening recovery in construction and real estate, and ongoing growth in tourism-oriented sectors.

The IMF’s report said while the economy would grow by 4.3 per cent this year, growth in oil production would likely slow to around two per cent in 2013. HSBC’s June data signalled a further rise in output levels in the UAE’s non-oil producing private sector, as 24 per cent of panelists reported increased activity. “The rate of expansion eased, however, and was the weakest since last November. Order book volumes also increased at a slower pace, although growth remained sharp overall,” it said.

According to the survey, deteriorating economic and political conditions in foreign markets were drivers behind a weak expansion in new business from abroad. While new export orders have risen in every month since June 2010, the latest rate of growth was the weakest in 11 survey periods.

The survey shows that non-oil producing private sector companies in the UAE hired additional workers in June, and linked the increase to higher new business.

Overall input prices increased in June, but the rate of cost inflation eased to the weakest since the beginning of the year.

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