(MENAFN- Khaleej Times) Non-oil business activity in the UAE was almost steady in August compared to the previous month, but a rise in new orders to a three-month high signalled a continued expansion of the private sector economy, a purchasing managers' survey showed on Tuesday.
The HSBC UAE Purchasing Managers' Index, which measures the performance of the manufacturing and services sectors, dropped to 53.3 in August, from 53.4 in July. A reading above the neutral 50 level indicates the economy is expanding.
The survey, however, showed a continued rise in output, orders and employment, while there was further stock accumulation as companies retained positive forecasts for growth.
Companies saw output growth edge up to 53.8 points in August from 53.7 in July.
New orders rose to 59.0 points. Growth in new export orders recovered to 54.0 points after a sharp fall to a 25 month low of 50.6 points in July.
Output prices dropped again below the 50 mark in August, indicating contraction, while growth in input prices accelerated to 55.2 points, rebounding from July's 53.8, which was the weakest input inflation for a year and a half.
Liz Martin, senior economist for Middle East and North Africa at HSBC, said: "It's a very solid number compared with much of the world, and what's particularly encouraging is the bounce in the new export orders index, after a somewhat worrying drop in July. Of course we remain concerned about the impact of the weak global demand climate, but these numbers suggest continued resilience so far."
Production levels rose for a thirty-first successive month during August. Growth was solid, edging up only slightly on July's four-month low, as higher volumes of incoming new business encouraged companies to raise activity.
Total new orders rose at the sharpest rate for three months in August amid reports of improved market conditions, firm demand and higher sales efforts. Growth of new orders was not limited to the domestic market as sales to foreign markets were reported to have risen in August.
Moreover, the rate of increase improved markedly on the 25-month low seen in July.
With order book growth continuing to outstrip that of output, backlogs of work increased in August (albeit slightly). As resources showed signs of being stretched, companies attempted to keep on top of rising workloads by hiring additional staff. In line with the trend throughout almost all of the survey history, payroll numbers continued to increase although the rate of growth was the slowest since April.
UAE non-oil private sector companies increased their purchasing activity during August. Solid growth reflected increased sales and the start of new projects. Companies were also able to add to their stocks of purchases, and to the sharpest degree for 15 months amid evidence of positive expectations for sales and output growth. Despite higher demand for inputs, vendors were able to deliver to quicker time scales. Prompt payments, the use of quality suppliers and market competition all helped to support an improvement in vendor performance.
"Although market demand remained positive, strong competitive pressures encouraged slight price discounting amongst UAE non-oil private sector companies for the second time in the past three months," the bank said.
"In contrast, total cost inflation accelerated, as input price inflation accelerated to a three-month high. Staffing costs also rose at a stronger rate [the sharpest for 14 months], although wage inflation remained below that of purchase prices," it said.
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