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UAE private sector strong in January despite new tax

Reuters DUBAI | Updated on February 05, 2018 Published on February 05, 2018

Growth of the United Arab Emirates’ non-oil private sector was strong in January despite the introduction of a 5 per cent value-added tax during that month, which raised costs and may have hit consumption, a survey showed on Monday.

The seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index, which covers manufacturing and services, fell to 56.8 last month from 57.7 in December, which was a 34-month high. The index remained high by standards of the last few years; above 50 indicates expansion and below shows contraction.

Growth in new orders fell to 61.0 in January from a 35-month high of 64.8 in December, when consumers stepped up buying to beat the tax. But output growth rose to 62.1 from 60.7, and employment growth hit 51.9, a 12-month high.

“The January survey indicates that non-oil sector growth got off to a strong start in 2018, notwithstanding the slight decline in the headline index,” said Khatija Haque, head of regional research at Emirates NBD. “The impact of VAT is evident in the sharp rise in input costs last month. While selling prices also increased in January, the survey suggests that the full rise in input costs was not passed on to consumers,” she said.

Input price inflation jumped to 57.4 from 52.4 because of the introduction of the tax, while output price inflation rose more moderately, to 51.9 from 48.5.

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Published on February 05, 2018
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