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UAE non-oil business growth picks up speed in February

Dubai - The headline PMI climbs to 53.1, up from 52.7 in January.

The UAE's non-oil private sector growth gained momentum in February after slowing down in the previous four months as new orders, output and jobs picked up.
The Emirates NBD UAE Purchasing Managers Index climbed to 53.1 in February, after slowing in four of the previous five months. The index hit a 46-month low in January because of the bleak economic outlook.
"The overall improvement in business conditions was helped by expansions in output, new orders and employment. All three variables rose slightly faster than in January, but the respective indexes remained below long-run trends. Meanwhile, with total cost pressures remaining muted, firms cut charges to the greatest extent since March 2010 as they competed to secure new clients," Emirates NBD said.
The bank pointed out that faster job creation was another factor behind the rise in the headline index during February. Employment rose at the quickest pace in three months, albeit only moderately overall. Anecdotal evidence linked hiring to rising workloads. The increase in new work was also sufficient to lead to further growth of outstanding business. Backlogs were accumulated for the second month running, following no change in December.
"The improvement in the Emirates NBD UAE PMI last month is encouraging, particularly against a backdrop of low oil prices, global growth concerns and a strong dollar. However, the rate of growth in the non-oil private sector remains much weaker than a year ago, when the headline PMI registered 58.1. We expect the environment over the coming weeks to remain challenging, with several global factors weighing on sentiment and activity," said Khatija Haque, head of Mena Research at Emirates NBD.
The headline PMI, a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy, climbed to 53.1 in February, from 52.7 in January. With the previous reading being the lowest since March 2012, the latest figure was still below the series average (54.5). Nonetheless, it bucked the recent trend of slowing growth, and was consistent with a solid improvement in business conditions overall.
Both output and new orders rose more quickly in February, contributing to faster growth of the sector as a whole. The respective rates of expansion were marked but slower than on average over the survey's history, having picked up only fractionally since the prior month. Higher new work was partly a result of lower tariffs, according to panellists. Meanwhile, data indicated that a rebound in growth of new export business had supported total new orders at UAE non-oil private sector firms.
The bank said the rate of expansion in input buying was broadly the same as in January, while the accumulation of pre-production inventories was unchanged. The start-up of new projects was reportedly behind higher purchasing activity, while stocks were raised at companies that expected future improvements in demand.
Finally, prices data signalled lower charges amid slowly rising input costs. Overall cost pressures were muted relative to the series average, with salaries and purchase prices both increasing only modestly. In the case of purchasing costs, there were reports that strong competition among suppliers had restricted inflationary pressure. Subsequently, output prices in the UAE's non-oil private sector dropped for the fourth straight month. Furthermore, the rate of decline was the sharpest in nearly six years. A number of firms opted to give discounts in an effort to attract new clients.
Saudi Arabia also witnessed rates of expansion in output, new orders and employment all accelerated, leading to sharper rises in purchasing activity and input stocks. Growth rates were still subdued relative to their respective long-run averages.
Saudi Arabia's monthly PMI increased to 54.4 - up marginally against the kingdom's lowest ever score in February.
- issacjohn@khaleejtimes.com