KHALEEJ TIMES, Thursday, Jun 10, 2021 | Shawwal 29, 1442
Dubai economy continues to grow in May, but at slower pace
Emirates:
The Dubai non-oil private sector economy continued to expand in May, but
the rate of growth cooled off from April's robust level, latest PMI data
suggests.
The headline IHS Markit Dubai Purchasing Managers' Index (PMI) noted that output
and new business both grew to a lesser extent, while there was a renewed
decrease in employment.
“After rising for the first time in three years in April, output charges
declined in the latest period, as firms sought to boost their sales whilst cost
pressures remained weak,” according to the PMI.
Seasonal adjustment
After posting a 17-month high of 53.5 in April, the seasonally adjusted IHS
Markit Dubai Purchasing Managers' Index fell back to 51.6 in May. However, this
still signalled the second quickest improvement in operating conditions for 10
months.
Four of the five sub-indices of the headline PMI provided a weaker contribution
than in April, with suppliers' delivery times the exception. The largest drops
were recorded by the output and new Orders Indices, which both decreased by 3.8
points over the month.
"After rising for three months in a row, the Dubai PMI slipped from 53.5 in
April to 51.6 in May, to signal a more modest improvement in non-oil business
conditions,” David Owen, Economist at IHS Markit, said.
He said both output and new orders rose at weaker rates, although April's data
was the strongest seen since late2019.
"The slowdown led firms to reduce their workforce numbers in May, but the
overall rate of job losses was only marginal. Price pressures on inputs remained
weak, allowing firms to decrease their selling prices after recording the first
uptick in three years in April," Owen said in a statement to Khaleej
Times on Wednesday.
Construction takes
the lead
Output in the non-oil economy increased for the sixth month running in May, but
the rate of growth slowed to the weakest seen in this sequence. Surveyed
businesses noted that work on ongoing projects had helped to offset a slowdown
in new order growth.
Construction was the only monitored sector to see a faster rise in output during
the month, with wholesale and retail seeing a slower expansion and travel and
tourism registering a renewed decrease in activity.
New business rose only modestly during May, after expanding to the greatest
extent for one-and-a-half years in April.
Travel and tourism
yet to pick up
Travel and tourism was again the weakest of the monitored sectors, as new work
declined for the fourth time in five months. Softer rises in both output and new
orders led companies to reduce their staffing levels in the latest survey
period.
The fall in employment was the second recorded in three months, but only slight
overall. Input purchases and inventories rose at the slowest rates since
February, as stronger demand pressure was partly offset by efforts to run down
existing stocks.
Vendor performance deteriorated for the fourth successive month in May, amid
reports that the pandemic had caused further disruption to input shipments.
Notably, the rate at which lead times lengthened was the fastest since the
record set in April 2020.
Input prices picked up for the fourth month in a row, but the overall rate of
inflation weakened to just a marginal pace. As a result, there was a renewed
decrease in output charges, after firms raised their prices for the first time
in three years during April. According to panellists, discounts were offered to
finalise orders and win new clients.
Promising H2 ahead
Atik Munshi, managing partner at Enterprise House, said the economy of any
country is a package of different sectors. At any point of time, some sectors
will perform better than the others while some may even face a downturn.
“Though the May 2021 PMI for UAE may show lower points compared to the previous
month it cannot be considered alarming as such bouts happen due various reasons.
Traditionally summer months in UAE are relatively slower for business,” Munshi
told Khaleej Times on Wednesday.
“We have seen a significant upturn in the real estate sector in Dubai and UAE
where transactions of billions of dirhams have been exchanged. Such funds will
be infused into the economy. It will take some time for these funds to percolate
into the economy which in turn will lubricate other business sectors.
“I am of the view that the later half of 2021 or the 3rd quarter and the
4th quarter would show much positive results as the general market sentiment has
improved in UAE,” he said.
The headline IHS Markit Dubai Purchasing Managers' Index is derived from
individual diffusion indices which measure changes in output, new orders,
employment, suppliers’ delivery times and stocks of purchased goods.
The survey covers the Dubai non-oil private sector economy, with additional
sector data published for travel & tourism, wholesale & retail and construction.