UAE private sector activity growth surges past Saudi and other emerging nations

Exports accelerated and new orders increased to reach all-time highs.

Activity in the UAE private sector surged to a record high last month, with growth outpacing Saudi Arabia and other emerging nations, according to the latest survey.
New orders rose to all-time highs, while export business also picked up at their fastest pace since the start of HSBC's purchasing managers' index (PMI) series in August 2009.
The survey measures on a monthly basis output across about 400 non-oil private sector firms.
"The reading is impressive but not unexpectedly so," said Liz Martins, a senior Middle East and North Africa economist at HSBC. "With the announcement that Dubai will host Expo 2020 and improved sentiment around the geopolitical situation, there is ample reason to believe that the strong performance seen in the UAE in 2013 will continue into 2014."
The UAE's reading rose from 56.3 points in October to 58.1 points last month, higher than Saudi Arabia's reading of 57.1. It was the first time in the history of the series that the UAE notched a score above the kingdom, indicating a more robust pace of non-oil growth.
A score above 50 marks growth, while below that level shows contraction.
Stable oil prices, together with strength in tourism, manufacturing and retail have helped the economy to recover from the aftershocks of a debt crisis in 2009.
Growth in Dubai – which accounts for the lion's share of non-oil activity – reached 4.9 per cent in the first half of the year, according to official estimates.
Until now, recent output in the UAE has trailed Saudi Arabia, which benefited from a US$130 billion stimulus package announced in 2011.
The PMI readings from both countries ranked above those from surveys in Brazil, Russia, India, South Africa and China.
But while some of those fast-emerging economies have suffered slowdowns in recent months, HSBC said it did not anticipate the risk of a similar trend in the UAE just yet.
A rebound in property prices has so far not fed through to inflationary pressures for consumers significantly. Greater competition meant firms responding to the survey reported a drop in sales prices last month. The decline was despite firms paying more for stock, staff wages and other services.
"We are at the end of the easy phase of the recovery cycle, but as momentum builds over the next 12 months it will be imperative for policymakers to manage the pace of growth," said Simon Williams, the chief economist at HSBC in the Middle East and North Africa.
A gradual pick-up in asset prices and credit growth would mean inflation rising next year, he said. Consumer price inflation edged up 1.3 per cent in October, compared to the year-earlier month, according to official data.
More than one in four respondents to the survey indicated increased activity, pointing to more business and stronger market conditions. Only 5 per cent indicated slower growth. Further positive signals were given by new orders and new export orders, which both rose at record levels.
Employment levels rose during the month, sustaining the increase in hiring at companies to almost two years. The rate of job creation was the highest since June. Similarly, average staff costs climbed, extending the sequence of rising wages to 22 months. About 5 per cent of respondents reported higher wages, with the vast majority indicating no change in costs.
Mr Williams said he expected benefits from Dubai hosting the World Expo 2020 to start stimulating the economy over the coming months.
Elsewhere in the region, Egyptian business activity returned to growth last month, putting an end to a 13-month downturn. The index rose to 52.5, up from 49.5 in October.
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