UAE: PMI ticks down in May, but business conditions continue to improve
The IHS Markit Purchasing Managers’ Index (PMI) ticked down to 52.3 in May from April’s 21-month high of 52.7. Consequently, the index remained above the 50-point threshold, indicating a continued improvement in business conditions in the non-oil private sector, albeit at a milder pace.
In May, both output and new orders expanded solidly, bolstered by improving domestic demand, while exports slipped due to Covid-19 measures abroad. That said, lingering uncertainty over the pandemic still weighed on sales, resulting in slower growth for new orders. Moreover, employment levels fell for the fourth month in a row in May.
On the price front, input prices rose for the fourth consecutive month in May, although at a slower pace, despite reports of some material shortages and higher transportation costs. Meanwhile, output charges decreased on average due to lower sales. Lastly, business expectations for the coming 12- month period climbed to a 10-month high in May amid prospects of output growth on the back of a recovery from the pandemic and the October Expo 2020.
Commenting on the expected evolution of employment, David Owen, economist at IHS Markit, noted:
“Employment numbers continued to disappoint in May […]. With backlogs starting to rise and demand strengthening, it is hoped that businesses will start to raise their staffing levels soon to support overall growth.”
Reflecting on the outlook of the non-oil economy, Scott Livermore, chief economist at Oxford Economics, noted:
“The non-oil economy appeared to have a strong finish to 2020, although growth likely slowed in early 2021. We still expect a strong recovery later this year, but there is a risk that travel restrictions in Europe and, in particular, the suspension of the air corridor with the UK remain in place for longer than expected. We now expect 2021 non-oil GDP growth of 3.8%, up from 3.5% seen last month.”