UAE private sector continues to recover in May as domestic demand improves

Dubai - Expectation climbs for sixth month in a row to the highest since July 2020

By Waheed Abbas

Published: Thu 3 Jun 2021, 8:56 AM

Last updated: Thu 3 Jun 2021, 10:54 AM

The UAE non-oil private sector continued to recover in May as the domestic demand improved on the back of rising confidence surrounding the Covid-19 pandemic, according to the latest IHS Markit UAE Purchasing Managers' Index (PMI) released on Thursday.

The private business sector’s expectation for the upcoming 12 months climbed again in May, rising for the sixth month in a row to the highest since July 2020. Hopes of output growth were largely attributed to a recovery from the pandemic, with the Expo 2020 also cited.

The seasonally adjusted PMI, which shows the performance of the non-oil private sector, clocked 52.3 in May, to signal a moderate improvement in business conditions and the sixth in as many months. The index was down slightly from 52.7 in April and remained below the series average of 54.1.

The data pointed to solid expansions in output and new business in May as new orders were particularly helped by improving domestic sales, whereas international orders were curbed by Covid-19 restrictions in some destinations for UAE exports. Overall new business growth slipped from April, but was still the second-fastest since August 2019.

But competitive pressure and uncertainty related to pandemic weighed on total sales that led to reduced new orders. Companies also lowered their selling prices, resulting in a slight decrease in average output charges.

“UAE's non-oil private sector showed further signs of improvement in May, although growth slipped marginally from April's recent high. New orders were largely supported by domestic sales, as latest data signalled a slight decrease in export orders,” said David Owen, Economist at IHS Markit.

"Employment numbers continued to disappoint in May, falling for the fourth month in a row. 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," said Owen.

The survey results found that vast majority of businesses kept employment numbers unchanged in May, while some firms cut their staff levels due to cash flow issues.

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