PMIs: business activity improves in April, but input costs rise

Khatija Haque - Head of Research & Chief Economist
Published Date: 04 May 2021

 

The UAE’s PMI rose fractionally to 52.7 in April from 52.6 in March.  New order growth accelerated in April and was the fastest since August 2019.  While export orders increased slightly last month, it appears as if the main driver was improving domestic demand.  Business activity also increased at a solid rate in April, although slightly slower than in March.

Despite improving output and new orders, employment in the private sector declined for the third month in a row, albeit only slightly, as firms remain focused on containing costs.  Input costs rose for the third consecutive month, reflecting higher raw materials prices and shipping charges, but the rate of increase was slower than in March.  Suppliers’ delivery times lenghthened again, reflecting shortages and supply chain issues for some items. As a result of higher input costs, firms raised selling prices for the first time since September 2018, although the increase was modest.  

Firms were more optimistic about the outlook for the next 12 months in April than they were in March, with 14% of respondents expecting their output to be higher in a year’s time.  However, the future output index remains below the series average. 

UAE PMI survey components

Source: IHS Markit, Emirates NBD Research

Saudi Arabia’s headline PMI rose to 55.2 in April from 53.3 in March, the highest reading since January.  Both business activity and new orders grew at the fastest rate in three months and employment in the private sector increased (slightly) for the first time in five months.

Businesses increased their stocks of purchases in response to stronger demand.  While some firms reported supply chain disruptions, on average suppliers’ delivery times shortened in April. Nevertheless, input costs increased at the fastest rate since November 2020, and firms raised selling prices slightly as well.    

Surprisingly, business optimism weakened in April despite the improvement in new work and business output.  Panellists remained concerned about the strength of the recovery and the impact of international travel restrictions on tourism.

Saudi Arabia PMI survey components

Source: IHS Markit, Emirates NBD Research

The April PMI for Egypt will be released on 6 May.