UAE nonoil private sector companies growing fast

April survey data pointed to a strong start to the second quarter of 2012 for the UAE nonoil private sector. Sharper expansions were recorded in output, total new business, buying activity and employment, pointing to an improved business environment. Price pressures eased over the month, but remained solid.
Climbing to 53.5 in April, from 52.3 in March, the headline seasonally adjusted HSBC United Arab Emirates PMI — a composite indicator designed to provide a single-figure snapshot of the performance of the nonoil private sector — reached a 10-month high. The latest reading signaled a solid and faster improvement in the health of the country's nonoil private sector.
Incoming new work to UAE nonoil private sector companies rose at the quickest pace for three months during the latest survey period, with growth reflecting stronger market demand and a more stable economic environment.
Anecdotal evidence suggested that domestic demand remained the principal driver of the expansion.
To accommodate faster growth of new business, UAE nonoil private sector firms raised output at a sharper pace in April. Activity levels in the sector were increased at a solid rate — the quickest for ten months.
Reflecting a stronger rate of expansion of new orders than output, backlogs of work at UAE nonoil private sector companies built up for the second month in succession in April.
UAE nonoil private sector firms took on additional staff and raised buying activity in April to meet the requirements of rising activity levels. Employment growth accelerated to the fastest since July 2011.
At a moderate rate, the latest increase in purchases was insufficient to add to inventory holdings.
Overall input prices faced by UAE nonoil private sector firms continued to increase during April.
The rate of inflation did ease to a three-month low, but remained above the long run trend for the series.
Data indicated that rising purchase prices were the predominant cause of total inflation; staff costs grew at only a marginal pace over the month.
Panelists commented that they felt restricted from passing on higher charges to clients in April as competitive pressures remained strong. The latest increase in charges was again only marginal.
Commenting on the UAE PMI survey, Simon Williams, chief economist for Middle East & North Africa at HSBC, said: "It's encouraging that the data picked up so strongly in April, particularly as the employment reading was positive. I am still somewhat cautious, as this is only one good month's data after 6 months in the doldrums, and the quieter summer months could put a dent in the uptrend. The UAE also continues to be held back by both tight monetary conditions and a limited fiscal stimulus. However, against a backdrop of stronger macro indicators out of Dubai in particular, the April number is positive."