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Record business optimism levels lift UAE economy

78% of firms surveyed for Emirates NBD Purchasing Managers’ Index expect higher output in a year’s time

Business optimism in the UAE rose to a record high in October prompted by a surge in oil prices as well as announcements of increased government spending and Expo 2020 investment, a survey by Dubai’s largest bank shows.

With nearly 78 per cent of firms surveyed for the Emirates NBD Purchasing Managers’ Index expecting their output to be higher in a year’s time, October witnessed improved sentiment as the economy expands at a steady rate.

Reflecting higher output requirements, firms increased their purchasing activity in October. The rate of expansion accelerated notably since September, and was the strongest registered since February.

The survey, compiled by IHS Markit, contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.

Khatija Haque, head of Mena research at Emirates NBD, said the headline UAE PMI eased to 55.0 in October from 55.3 in September. “It has been broadly stable between 55 and 56 for the last four months, indicating growth in the UAE’s non-oil private sector at a similar rate to last year, when official GDP data showed the non-oil sector expanded 2.5 per cent.”

The prevailing business optimism in the UAE has been reflected in a World Bank survey that showed the Emirates fast emerging as one among the top 10 in the Ease of Doing Business ranking of 190 countries.

In the latest report, the UAE jumped 10 places in the World Bank’s ranking to 11th position worldwide in 2018 from 21st position last year to lead the Arab world for the sixth consecutive year.

The Emirates NBD survey report noted that output growth slowed to the weakest in six months in October, despite relatively robust new order growth. “Anecdotal evidence suggested that promotions and price discounts likely contributed to the rise in new orders last month. Indeed, new export order growth also slowed sharply last month,” it said.

The Emirates NBD UAE PMI showed that private sector companies reported another increase in new business during October.

“Anecdotal evidence suggested that promotional activity was partly linked to the improvement. That said, new orders from abroad grew at the weakest pace since March,” it added.

“Employment was broadly flat in October after declining in the prior two months. Staff costs, a good proxy for wages, were also largely unchanged last month. The softness in the labour market is at odds with output and new work growth. However, the increased margin pressures in October likely contributed to firms’ reluctance to boost hiring,” said the report.

The report further said margins were squeezed further in October as input costs rose while selling prices declined.

Input cost inflation was the fastest since April, on higher fuel and raw materials prices.

“Selling prices have declined on average in five of the last six months, as firms have had to compete for new business and to stimulate demand.”

Source : Khaleej Times

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