In UAE, Non-oil Private Sector Continues to Expand at Solid Pace in July

Kimberly Watson, Editor in Chief
August 07, 2012 /

New order volumes in United Arab Emirates continued to increase sharply during July, with the rate of growth unchanged on the previous month.

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. Panellists indicated that securing foreign sales was becoming increasingly difficult in line with tougher operating conditions abroad.

July’s survey indicated another increase of output volumes in UAE’s non-oil private sector economy. Growth has now been recorded throughout the past two-and-a-half 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.

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.

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.

Finally, July’s survey indicated that operating costs continued to rise, but at the slowest rate for a year-and-a-half as purchase price inflation weakened to a 22-month low and salaries increased only modestly. Part of the rise in overall costs was passed onto clients in the form of higher charges. However, a desire to remain competitive meant that output price inflation was only slight during the latest survey period.

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


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