UAE sees solid recovery of key sectors

Most economic and commercial activities in the UAE showed positive signs in May, recording their best performances since the start of the Covid-19 pandemic, data released by federal statistics centre shows.

Highlighting the solid recovery of key sectors that support the national economy, registered activities in May 2021 suggested a growing demand, amidst signs suggesting that demand will further increase in the coming months, according to the Federal Competitiveness and Statistics Centre (FCSC).

The IHS Markit Purchasing Managers’ Index for May also shows solid expansion in non-oil sector both in terms of output and new orders, bolstered by improving domestic demand.

The FCSC data shows increases in price indexes covering the seven sectors that constitute the UAE’s Consumer Price Index (CPI), led by the culture and entertainment sector, whose index rose to 106.36 points in May 2021, compared to 103.68 points in April.

The clothing and footwear sector recorded 115.02 points compared to 114.03 points during the same reporting period in April, while the food and beverage sector recorded 107.57 points in May compared to 106.82 points in April.

The other goods and services sector rose to 115.75 points from 114.77 points, including the restaurants and hotels sector rising to 115.85 points from 115.09 points, the health sector increased to 106.31 points from 106.17 points, and the transport services sector recorded 110.80 points, rising from 110.33 points.

The tobacco and education sectors also witnessed steady performances, while other indexes that comprise the CPI declined. As a result of these factors, the CPI in the UAE surged to 106.49 points in May 2021, a growth of 0.25 per cent compared to April.

The IHS Markit 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, while exports slipped due to Covid-19 measures abroad, 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.

David Owen, an economist at IHS Markit, noted that 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."

Scott Livermore, chief economist at Oxford Economics, noted that 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 per cent, up from 3.5 per cent seen last month.”

—issacjohn@khaleejtimes.com