United Arab Emirates: PMI ticks up to near two-year high in April
May 4, 2021
The IHS Markit Purchasing Managers’ Index (PMI) inched up to a 21-month high in April, clocking in at 52.7, up from March’s 52.6. As such, the index continued to move further above the 50-point threshold, indicating an improvement in business conditions in the non-oil private sector.
April’s improvement was largely due to strong growth in new orders, which logged the sharpest rise in 20 months, while output expanded robustly. The upturn in demand was mostly due to firming domestic demand, as exports also grew but at a more moderate pace. Moreover, the gradual rollout of the Covid-19 vaccine made businesses more confident and led improved market conditions. However, firms opted to contain payroll costs and didn’t increase operating capacity, leading to a slight drop in employment levels in April.
On the price front, input prices rose for the third month running, albeit at a softer pace than in March, due to ongoing global delivery delays and input shortages. Firms passed on the extra costs to clients, resulting in a rise in output prices for the first time in over two-and-a-half years. Lastly, business expectations increased for the fifth month in a row amid prospects of economic recovery from the Covid-19-induced fallout and the October Expo 2020.
Commenting on the outlook, David Owen, economist at IHS Markit, noted:
“The UAE non-oil economy remains on the right track to a recovery from COVID-19, latest PMI data suggests. […] That said, the rate of improvement in operating conditions was still below the 12-year survey average, reflecting further pandemic-related disruptions for a number of businesses and sectors.”
Author: Marta Casanovas , Junior Economist