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UAE PMI rises in May on strong domestic demand

Khatija Haque - Head of Research & Chief Economist
Published Date: 03 June 2022

 

The UAE’s Purchasing Managers’ Index (PMI) rose to 55.6 in May from 54.6 in April, the highest reading since mid-2019. The survey points to a solid expansion in the UAE’s non-oil sectors last month, with both business activity and new work rising at a faster rate than in April.  According to the survey, 28% of firms reported an increase in business activity last month and attributed this to “improving economic conditions, new clients and ongoing projects” according to S&P Global.

New order growth may have been due to increased marketing and some price discounting – selling prices declined on average in May after rising slightly in April – and appears to be driven largely by domestic demand as new export orders increased at a more moderate rate in May.

UAE PMI and key survey components

Source: S&P Global, Emirates NBD Research

The price discounting last month came despite another increase in input costs suggesting that - for now - some firms are absorbing higher raw materials and shipping costs. Overall input costs have increased every month since January 2021, and at an accelerating rate too.   

Private sector employment increased somewhat in May, but the pace of job growth is markedly slower than the growth in business activity, and this has likely contributed to the increase in the backlogs of work, which rose at the fastest rate since September 2021.

Overall, firms remain optimistic about the outlook over the coming year, with 15% of respondents anticipating an increase in their activity over the next 12 months.  However, the “future output” index remains well below pre-pandemic levels, which may indicate continued uncertainty about the economic outlook in the context of rising interest rates and slowing global growth.

May PMI data for Saudi Arabia and Egypt will be released on Sunday 5 June.