UAE Close to Saudi Arabia

11/06/2013 12:00 pm EST


A recent survey shows significant business growth in the UAE, which many investors are confident shows the economy in the region will perform well into the year's end, writes Tom Arnold, of The National.

Private-sector activity in the UAE is close to catching up with the performance of the GCC powerhouse Saudi Arabia, according to a monthly survey of purchasing managers.

The HSBC purchasing managers' index (PMI) for the UAE for last month came in at 56.3 points, slightly down from September's 56.6.

Saudi Arabia's PMI reading, dragged lower by a deceleration in output and new orders, fell two points to 56.7, indicating a more moderate pace of growth in its private sector.

At a difference of only two fifths of a point, it was the closest the UAE's figure has been to the kingdom's since the index began in August 2009.

A reading above 50 indicates growth in business activity; below 50, contraction. In the UAE, some 400 private-sector purchasing managers took part in the survey.

“The [UAE] headline number may be down on the September high, but the underlying data remains strong,” said Simon Williams, the chief economist of HSBC Middle East and North Africa. “Production and new orders are continuing to gain, employment is up, and inflation still looks benign.

“I remain confident that the economy will perform well into the year-end.”

The UAE managers' reports of new export orders rose at the highest rate in the PMI survey history. The managers said the increase was driven by competitive pricing and buoyant market conditions.

New orders also grew, with 46% of respondents indicating growth.

Employment picked up, although the rate of growth eased. About 5% of companies reported higher employment levels, while less than 1% indicated a decline.

HSBC warned that a rise in the index for input prices to 54.2 signaled inflationary pressures could be starting to build, as demand strengthens in the economy.

“Although the pressures look limited to firms—rather than consumers—for now, they could well feed through to higher output prices going forward,” HSBC said in a note about the data.

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