x Abu Dhabi, UAEFriday 19 January 2018

Private sector activity in UAE rises to defy global slowdown

Private businesses in the region continue to shrug off the impact of the global slowdown, the latest data show.

Private-sector businesses in the UAE and Saudi Arabia posted stronger performances last month, shrugging off the lingering impact from the global slowdown.

Surging demand for new orders propelled the increase in activity in the Emirates, according to data from HSBC's non-oil sector purchasing managers' index (PMI) survey. New orders jumped seven points to a 15-month high of nearly 61.

The overall headline score rose half a point to 53.8 from the month previously, the data showed. Readings above 50 indicate expansion.

"The UAE continues to demonstrate a much more robust pace of growth than its developed and emerging market counterparts outside of the region," Simon Williams and Liz Martins, both HSBC economists in the Middle East and North Africa region, wrote in an analysis of the data yesterday.

The data underlines the resilient performance of the pillars of the nation's economy in the face of global headwinds. Recent data emerging from the trade, transport and tourism sectors have all underscored the strong performances.

Providing further evidence of the trend, new export orders in the country rose to 54 during the month.

Employment also posted gains, along with overall output.

But the HSBC economists warned the private sector could still feel "lagged feed-through" from the global slowdown, especially if the euro-zone crisis worsened.

The data also showed a continuing inability of firms to pass on higher costs to consumers. Rises in output costs were below input costs once again.

Saudi Arabia's headline reading gained two points during the month to 60. The score was the highest reading since May and the biggest monthly gain since January.

"We expect this outperformance to persist," wrote Mr Williams and Ms Martins. "While new export orders rose in September, the PMI shows that public spending-led domestic demand continued to be the economy's prime driver.

With oil earnings at record highs, and inflation low, we see no reason for this expansionary fiscal stance to be tightened in the near term."

The PMI data is adjusted to take into account the seasonal impact of the summer on readings.