Growth in business activity in the United Arab Emirates’ non-oil private sector slipped slightly in February as expansion in output and employment weakened, but new orders were strong, a purchasing managers’ survey showed on Monday.
The HSBC UAE Purchasing Managers’ Index (PMI), which measures the performance of the OPEC member’s manufacturing and services sectors, decreased to 52.0 points last month from 52.4 in January.
The seasonally adjusted index remains above the 50-point mark which separates growth from contraction, the survey of 400 private sector firms showed.
“The strong new order score is encouraging and suggests that growth may begin to build pace in the months ahead,” said Simon Williams, chief economist for the Middle East and North Africa at HSBC.
“For now, though, the February reading points only to stabilization and paints a picture of an economy still operating below capacity.”
Total new order receipts continued to grow in February although at a weaker pace, reaching 56.8 points after 57.5 in the previous month. Export orders for UAE non-oil private sector firms jumped to 55.0 points from 52.8, with respondents reporting the expansion was driven by stronger demand from clients in Africa and other Middle Eastern countries.
Output growth fell to the lowest level in five months in February, while employment only picked up marginally.
“The weak employment growth and wages readings are a particular worry while data showing that producers are unable to pass on higher input costs suggests their pricing power is still very limited and that their margins remain under pressure,” Williams said.
Overall input price inflation accelerated to a three-month high in February, the survey showed, while the staff costs index rose back above 50 after two months below that level.
A Reuters poll of economists in December estimated gross domestic product grew 3.9 percent in 2011 and would expand 3.1 percent this year.