#UAE non-oil sector showed signs of improvement in May; job numbers disappoint | ZAWYA MENA Edition

UAE non-oil sector showed signs of improvement in May; job numbers disappoint | ZAWYA MENA Edition

The UAE non-oil economy continued to recover midway through the second quarter, as domestic demand improved on the back of rising confidence surrounding the COVID-19 pandemic, a survey showed on Thursday.

While output rose at a solid pace, employment numbers continued to slow down and input purchases increased only slightly.

The seasonally adjusted IHS Markit UAE Purchasing Managers' Index (PMI), which covers manufacturing and services, edged down to 52.3 in May from 52.7 in April, highlighting a moderate improvement in business conditions.

Improving domestic sales helped new orders, whereas international orders were stymied by COVID-19 restrictions in some destinations for UAE exports, the IHS Markit report said.

"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.

Surveyed firms highlighted that competition in the market and uncertainty linked to the pandemic led to reduced new orders, prompting companies to lower their selling prices.

Several businesses kept employment numbers unchanged in May, while some firms cut their staff levels due to cash flow issues. As a result, employment fell for the fourth month in a row, the report noted.

"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," Owen said.

Business expectations for the upcoming 12 months climbed again in May, the survey said. Only around 14 percent of surveyed firms expected output to rise in the next 12 months and it was attributed to a recovery from the pandemic, with the Expo 2020 also cited. The multi-month Expo 2020, which starts in October, is expected to attract visitors to the Emirates.

According to the IMF, the UAE economy contracted 5.9 percent last year. But it has had one of the world's fastest COVID-19 vaccination programmes.