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UAE new business growth weakest since 2012

|By Arabian Post Staff| The UAE’s growth in new business was the weakest since April 2012, according to the purchase manager’s index (PMI) data for November. Companies also saw their pricing power diminish while input costs rose further. But competitive pressures meant that charges fell regardless.

The UAE’s non-oil private sector expansion strengthened in November, having eased to a two-and-a-half year low during October. Business conditions improved solidly, with the highlight being a marked and sharper rise in output.

At 54.5, the headline Emirates NBD UAE Purchasing Managers’ Index – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – showed that the health of the economy strengthened midway through the fourth quarter. Up from October’s recent low (54.0), the latest figure pointed to a solid improvement in business conditions. That said, the rate of growth remained much slower than that seen earlier this year and throughout 2014.

Underlying data indicated that higher output was a key driver of the overall expansion. Activity rose more quickly in November, having previously increased at the slowest rate in two years during October. New business gains were behind rises in output, according to panellists.

Though remaining marked, growth of new work failed to accelerate in November. In fact, the respective index dropped slightly to a 43-month low. Anecdotal evidence nevertheless pointed to new client wins resulting from better marketing, while data highlighted a second consecutive expansion in new export work. However, some firms suggested that new orders had been undermined by increased competition.

Non-oil private sector employment in the UAE continued to rise in November, thereby extending the current sequence of hiring to 47 months. The rate of job creation was the quickest since July, with firms reportedly taking on extra staff in preparation for the start-up of new projects. Backlogs of work also increased, albeit only marginally.

Growth of buying activity picked up in line with output requirements during November. The expansion was the most marked in three months, and it contributed to another increase in stocks of purchases. A number of panellists mentioned that they had raised inventories in response to further inflows of new business.

Meanwhile, a weaker rise in purchasing costs led to an easing in the overall rate of input price inflation. Total cost pressures were at a five-month low, although they remained broadly similar to the average seen over 2015 as a whole.

Firms decided to cut charges in spite of higher input costs during November. Tariffs were driven lower by greater competition, but the rate of decline was only slight overall.