UAE’s PMI drops to 57.4 in December

Overall economic outlook positive and poised to carry forward momentum, economists say

The UAE’s purchasing managers’ index ( PMI) declined to 57.4 in December, from a record high of 58.1 in November. The index, compiled by HSBC Holdings and Markit Economics, is a composite indicator of UAE’s non- oil economy based on data compiled from monthly replies to questionnaires sent to purchasing executives in around 400 private sector companies in the UAE, representing manufacturing, services, construction and retail.

“The HSBC PMI offers clear evidence that the UAE economy not only finished 2013 strongly but is well placed to carry momentum into the new year,” Simon Williams, chief economist at HSBC Middle East, said in an e- mailed statement.

Non- oil private sector

The index data showed that activity in the UAE’s nonoil producing private sector jumped to a record high as new order intakes expanded. The rate of growth in new export orders increased on the back of improving economic conditions, competitive pricing and good marketing efforts.

However, the pace of expansion was the slowest in four survey periods.

New orders increased, marking second- quickest jump in the series history, after November’s record high. Survey respondents linked new order growth to good economic conditions, higher construction activity and increased sales team efforts.

Input costs increased further, which sent non- oil private sector companies to increase their selling prices after two months of price reductions. Purchase prices climbed at its fastest pace in more than a year.

“Input prices rose marginally faster in December, and firms passed on some of these costs by raising output prices for the first time in three months. We expect output prices to continue to rise modestly through 2014, as margins have been under pressure for several years,” a statement by Emirates NBD Research said.

Wage inflation, meanwhile, was stable compared to November.

Staffing levels rose with the increased activity and new orders. However, employment growth eased compared to the previous month. The gain in employment and quality of purchases suggests that “firms are optimistic that the current strong demand environment will persist,” Williams said.

According to him, backlog of work increased by almost two points to 54.