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UAE Freezones Biz News Updates
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UAE business conditions rebound
UAE
PMI hits 4 months high in March as business conditions improve
Driven by sharper rises in output and new orders, business conditions in
the UAE improved at the strongest pace in four months in March.
A survey sponsored by Emirates NBD said total new work increased more
quickly in spite of a renewed fall in exports. Both employment and input
stocks remained in growth territory, but the respective rates of expansion
eased slightly. On the price front, input costs rose only modestly, meaning
that companies were able to reduce their tariffs amid greater competition.
Khatija Haque, head of MENA Research at Emirates NBD, said while the
improvement in the Emirates NBD UAE Purchasing Managers' Index, or PMI, in
March is encouraging, the average PMI for first quarter 2016 signals a
further slowdown in the non-oil private sector of the UAE at the start of
this year. "Nevertheless, the solid growth in output and new orders in the
first quarter suggests that domestic demand is holding up well despite the
headwinds of a strong USD and low oil prices."
The headline Emirates NBD UAE PMI, a composite indicator designed to give an
accurate overview of operating conditions in the non-oil private sector
economy, climbed to a four-month high of 54.5 in March. Up from 53.1 in
February, the latest figure indicated that growth had continued to rebound
from January's near-four year low. However, the improvement in business
conditions across the first quarter (53.4) was the weakest on average since
first quarter 2012.
The report said growth of the non-oil private sector as a whole was
supported by higher output and new work during March. In particular, output
rose at the quickest rate since last September, helped by enhanced marketing
efforts and incoming new projects. New business also increased at a faster
pace. "However, the expansion was subdued relative to the long-run trend,
with data highlighting weakness in international demand. New export orders
fell for the first time in six months, albeit only marginally," the bank
said.
The sharp rise in output requirements was reflected by firms' purchasing
during March. Growth of input buying picked up to a four-month high, with
panellists commenting on stronger-than-expected sales. Firms were also
upbeat towards future demand, leading them to build up their pre-production
inventories. The rate of accumulation was only modest overall.
Employment in the UAE's non-oil private sector increased further in March,
extending the current sequence of job creation to 51 months. The rate of
hiring eased since February, however, and was muted in the context of
historical data. Meanwhile, backlogs of work rose only fractionally, with
some companies suggesting that they had become more efficient in
production.
Prices data pointed to subdued cost pressures in March. The rate of input
price inflation was only modest overall, despite accelerating to the fastest
so far in 2016. The rise in total input costs was restricted by a marginal
drop in salaries - the first recorded since December 2011. Subsequently,
businesses were able to cut their tariffs for the fifth straight month.
Increased competition was cited as the main reason behind the fall.
The upbeat sentiment recorded in March is in sharp contrast to the report by
market research firm Nielsen that 53 per cent of residents polled in the
fourth quarter of 2015 believed that they were in recession.
The number of people expressing recessionary sentiment, representing 4.9
million of the UAE's nearly 10 million population, registered a
ten-percentage-point increase from the previous quarter, it said.
Business Monitor International said the UAE economy would prove to be
resilient to lower oil prices, and its growth outlook is positive and
well-balanced. On an emirate level, we are most bullish about Dubai,
particularly its real estate."
The non-oil economy will be the main growth driver, with Dubai outperforming
on an emirate level. "Non-oil sector expansion in Abu Dhabi will remain
robust.
Abu Dhabi Commercial Bank argued that with a diversified economy and strong
foreign reserve position makes the Emirates one of the best-positioned
countries to withstand the low oil price environment. The bank's forecast
said that the UAE would not be immune to the slowdown in wider GCC non-oil
GDP growth being affected via consumption/tourism, capital flows, and trade
or the lacklustre global growth backdrop.
April 5, 2016
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Courtesy Khaleej Times
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