x Abu Dhabi, UAESaturday 20 January 2018

Business activity falls in sign unrest spillover is fading

UAE business activity slips for a second month in a row, signalling the positive economic impact from regional unrest may be ebbing.

UAE business activity dropped for a second consecutive month in the latest sign that the positive spill-over from the Middle East unrest may be fading.

The rate of increase in output levels rose at its slowest pace last month since last September, according to HSBC's purchasing managers' index (PMI).

"The headline number has softened for a second consecutive month, suggesting that the lift the UAE received from unrest elsewhere may be fading," said Simon Williams, chief economist for Middle East and North Africa at HSBC.

The dip follows similar falls in M2 money supply and banking deposits in May, the latest Central Bank data show. M2 money supply, the amount of money in circulation, declined by 1.1 per cent, the first monthly drop since November. Deposits slipped by 0.4 per cent to Dh1.123 trillion, the first monthly drop since December.

The economy received a boost earlier this year as the UAE's banking and tourism industries benefitted from instability in Egypt, Tunisia, Bahrain and elsewhere.

PMI reached a series peak of 57.5 points in April. As the financial system sucked in increased money flows money supply and deposits also rose strongly in February and March.

PMI fell from 56 points in May to 55.2 points last month, its lowest reading for three months.