Weekly Insights 3 Jun 2021: Green Shoots of Economic Recovery







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1. Manufacturing PMIs globally suggest that a recovery is underway

  • Global manufacturing PMI touched 56 in May (Apr: 55.9), the highest since Apr 2010, supported by an acceleration in new orders growth.
  • Most European nations reported an increase in PMI (improved sentiment as restrictions are being eased across the region) – with the UK headline indicator hitting a record high in May. Job creation continued at a near-record pace in the region, touching a survey-high in the UK.
  • The uptick in China was a tad muted in contrast, while in Japan and India manufacturing PMI declined compared to a month ago – not unsurprising given the ongoing surge in Covid19 cases (& subsequent decline in demand).
  • On the other hand, a breakdown of the Global Manufacturing PMI indicate “the steepest rise in input costs for over a decade and record inflation of selling prices”. For now, major central banks maintain the view that the current jump in inflation is temporary.
  • In the Middle East, UAE and Saudi Arabia are in expansionary territory while Egypt & Lebanon remain below-50. UAE, where PMI declined by 0.4 points in May, was supported by domestic orders while employment fell for the 4th straight month.

2. Merchandise trade continues to recover in 2021, but with regional disparities & subdued services trade

  • A recovery in trade has been underway since H2 2020. The WTO’s latest issue of the Goods Trade Barometer underscores the pace of recovery: at a reading of 109.7, it is nearly 10 points higher than the baseline (100) and also up by 21.6 points in year-on-year terms.
  • All components identified as drivers of trade have clocked in an improvement, with the biggest gains coming from export orders (from PMI), air freight (check next slide) as well as electronic components.
  • The WTO forecasts an 8% increase in trade this year versus the 5.3% drop in 2020. However, this does not convey the full picture which includes disparities by region or the lagging behind services trade.
  • This was reflected in UNCTAD’s Global Trade update: trade in Q1 2021 was higher than pre-crisis levels and up by 3% compared to Q4 2019, driven by the “strong export performance of East Asian economies”; while trade in services remained “substantially below averages”. With the energy sector lagging behind in recovery, the Middle East region posted below-average value of exports in Q1.

3. Shipping vs air cargo costs

4. Tourism: As regions with large domestic markets recover faster, no surprise that the Middle East lags

5. Spending in Saudi Arabia: yoy surges a result of the 2020  “lockdown effect”; e-commerce holds its own

  • Consumer spending in Saudi Arabia posted a yoy surge in Apr, thanks to the effect of the lockdown in Apr 2020. However, in mom terms, both PoS and ATM transactions dropped in Apr, by 4.1% and 6.1% respectively.
  • A breakdown by sector shows that while month-on-month PoS transactions declined across most sectors in Apr (latter half was the month of Ramadan), two sectors with notable increases were clothing (+29%) and food & beverages (+2%). E-commerce transactions continued to increase, up by 4.6% mom in Apr, following a 27% surge in Mar.
  • Cement sales, a proxy indicator for growth of the non-oil economy, posted an increase of 9.8% yoy in Jan-Apr, in contrast to the effect during the early stages of the lockdown in 2020.

6. Drop in loans to the UAE’s private sector vs. overall loan growth in Saudi Arabia

  • Loans disbursed in both Saudi Arabia and the UAE have been ticking up in 2021. Overall loans increased by 0.8% yoy in the UAE in Jan-Apr while in Saudi it has increased by 14.1%.
  • There is a disparity by sector as well: in the UAE, the increase in claims to the public sector (+10.2%) and government (+10.6%) outpace loans to the private sector (-2.7%). In Saudi Arabia meanwhile, claims on the private sector grew by 14.5% yoy during the same period, faster than claims on the public sector (12.6%).



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