UAE’s non-oil October business activity is at 4-month high

Growth in business activity in the United Arab Emirates’ non-oil private sector climbed to a four-month high in October, helped by a rise in output, new business and employment growth, a purchasing managers’ survey showed on Thursday.

The HSBC UAE Purchasing Managers’ Index (PMI), which measures the performance of the OPEC member’s manufacturing and services sectors, rose to 53.4 points from September's 52.3 points. The 50-point level separates growth from contraction.

September’s PMI was revised up from 52.1 points. Data provider Markit said the revision followed new estimates for seasonality in a number of variables; it did not elaborate on the change.

“It’s an encouraging print that suggests the UAE economy is coming back to life after the quiet summer months,” said Simon Williams, chief economist for the Middle East and North Africa at HSBC.

The seasonally adjusted output index saw a three-month high of 53.4 points in October, with respondents linking the growth to favorable market conditions and gains in new business, the survey of 400 private sector firms showed.

Employment growth also reached a three-month high of 51.7 points in October after 50.8 points in the previous month.

However, the UAE’s central bank governor told Reuters this week that the country would see a slowdown in business because of weak global economic conditions.

“I’m still concerned that global economic weakness is going to weigh on the performance of the non-oil economy in the months ahead, though, and am anxious at the clear evidence that margins are under pressure,” Williams said.

“We maintain our forecast that the economy will grow at less than 4 percent this year.”

Analysts polled by Reuters in September predicted the UAE’s economic output would expand 3.8 percent this year after a 1.4 percent rise in 2010. They trimmed their 2012 growth forecast to 3.8 percent from 4.0 percent predicted three months previously because of a worsening global outlook.

Price pressures accelerated slightly in October, the PMI data showed; output prices rose at their fastest rate in four months and the overall input prices index climbed from September's seven-month low.

Consumer price inflation in the UAE was 0.4 percent month-on-month in September, the fastest pace in three months, mainly because of higher food and education costs.

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I’m still concerned that global economic weakness is going to weigh on the performance of the non-oil economy in the months ahead, though, and am anxious at the clear evidence that margins are under pressure

Simon Williams, chief economist for the Middle East and North Africa at HSBC