UAE: PMI moves into expansionary territory for first time in six months in June

UAE PMI June 2020

UAE: PMI moves into expansionary territory for first time in six months in June

The IHS Markit Purchasing Managers’ Index (PMI) increased to 50.4 in June from 46.7 in May. As such, the index edged marginally above the 50-threshold, marking the first month of improving business conditions in the non-oil private sector since December 2019.

The headline reading reflected a solid rise in new business—the fastest rise since August 2019—while output also increased for the first time this year. The overall improvement came against the backdrop of improving client demand, both domestically and abroad. However, employment levels dropped in the month, as firms continued to try and cut costs. On the price front, input costs rose for the second consecutive month, while output costs fell for the 21st straight month amid reports of promotional pricing to help bolster client demand.

Looking ahead, firms outlook for the coming year improved for the first time since March, as businesses were optimistic regarding future output and sales. The continued relaxing of containment measures and the prospect of the rescheduled Expo 2020—now slated for October 2021—spearheaded the renewed optimism.

David Owen, an economist at IHS Markit, struck a note of caution, commenting:

“Despite this positivity, looking at the data over the past few months shows just how large a rebound in output is required to return the UAE economy to pre-COVID levels. Renewed growth in June marked only a slight reprieve from the downturn that reached its peak in April. In addition, evidence from panellists suggested that balance sheets remain in a tricky situation, as firms made another solid cut to workforces in order to reduce costs. Thus it may be a long path to recovery for the labour market.”

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