Weekly Economic Commentary – Jun 6, 2021



Download a PDF copy of this week’s economic commentary here.


Global equity markets had a good run last week: US markets were up by 0.6% from a week ago while in Europe, the Stoxx600 ended on another record-high and the MSCI World index gained by 0.7%. Regionally, both Saudi Arabia and the UAE extended their weekly gains streak, posting the 4th and 5th consecutive weeks of gains respectively. The dollar was near its weakest this year, while a strengthening yuan – a three-year high against the USD and a five-year high against a trade-weighted basket of currencies – could ruffle feathers at the ongoing US-China discussions. The oil rally continued with Brent topping USD 72 a barrel for the 1st time since 2019 while the WTI touched USD 69.76, the highest since Oct 2018. Gold fell by 0.6% from a week ago, even though it rebounded on Friday after weaker than expected US non-farm payrolls data.

Weekly % changes for last week (3-4 June) from 27 May (regional) and 28 May (international).


Global Developments


  • Non-farm payrolls increased for the 5th straight month in May, up by 559k, with many sectors adding jobs including leisure and hospitality (292k after Apr’s 328k gain) as well as education and health (87k, 3 times Apr’s gain) while construction jobs fell at an accelerating pace. Average hourly earnings increased by 0.5% mom (Apr: 0.7%) while the labour force participation rate unexpectedly dropped to 61.6% and the unemployment rate slowed to 5.8% in May (Apr: 6.1%).
  • Initial jobless claims dropped below 400k in the week ended May 29th, at 385k, below the revised 405k the week before. The 4-week average fell to 428k, the lowest since Mar 2020. In spite of the decrease in weekly claims, continuing claims inched up by 169k to 3.77mn in the week ended May 22.
  • Earlier in the week, the ADP jobs report showed that 978k jobs were created in the private sector in May (Apr: 654k), posting the largest gain since Jun 2020.
  • Factory orders fell by 0.6% mom in Apr, after gaining by 1.4% in Mar; in yoy terms, orders surged by 14.2%. While orders for non-defense capital goods surged by 2.3%, orders for motor vehicles and parts slipped by 6.1% and that for electrical equipment, appliances and components fell by 0.7%.
  • ISM manufacturing PMI increased to 61.2 in May (Apr: 60.7) with new orders rising to 67 (Apr: 64.3) though employment index declined to 50.9 (55.1), the lowest level since Nov. ISM non-manufacturing PMI touched a fresh record high of 64 in May (Apr: 62.7), thanks to new orders (63.9 from 63.2) as well as new export orders (60 from 58.6) while price pressures increased (80.6 from 76.8).
  • Markit manufacturing PMI in the US rose to 62.1 in May (Apr: 60.5), with strong expansions in both output and new orders (the latter’s pace the fastest on record). Services PMI increased to 70.4, with new orders up to a record-high of 63.9 while employment softened to 55.3 from 58.8 in Apr.


  • Eurozone’s manufacturing PMI rose to 63.1 in May (Apr: 62.9), with slower increased in output and new orders while on the price front, average input costs rose again substantially. Services PMI, which expanded to 55.2 in May (Apr: 50.5), was the main reason for the uptick in composite PMI (up 3.3 points to 57.1). By country, Ireland, Spain and France led the upward charge in services.
  • Inflation in the eurozone climbed by 2% yoy in May (Arp: 1.6%), the highest level since Oct 2018, once again due to the surge in energy prices (+13.1% yoy, but remember that prices plunged during the initial lockdown). Core inflation rose to 0.9% from 0.7% the month prior.
  • Producer price index in the eurozone advanced by 7.6% yoy in Apr (Mar: 4.3%), the most since Sep 2008. In mom terms, prices rose by 1% mom (Mar: +1.1%).
  • Manufacturing PMI in Germany slipped to 64.4 in May (Apr: 66.2), with respondents highlighting supply constraints and cost pressures. The services and composite PMIs clocked in at 52.8 and 56.2 respectively (Apr: 49.9 and 55.8 respectively), but there was evidence of an intensification of cost pressures in the services sector to the highest since mid-2008.
  • Germany’s harmonized index of consumer prices increased by 0.3% mom and 2.4% yoy in May, driven by energy prices (+10% yoy) and food prices (+1.5%). This was the highest annual inflation rate since a decade (Sep 2011) and overshot the ECB’s inflation target.
  • German retail sales slipped by 5.5% mom in Apr, following a 7.7% gain in Mar. In yoy terms retail sales picked up by 4.4%. Retail sales in the eurozone fell by 3.1% mom given the stricter restrictions imposed in many parts of the area: sales declined by 5.1% for non-food products and by 2.0% for food, drinks and tobacco, while it rose by 0.4% for automotive fuels.
  • Unemployment rate in Germany remained unchanged at 6% in May, with the number of unemployed falling by 84k to 2.687mn.
  • Manufacturing PMI in the UK surged to a record high of 65.6 in May (Apr: 60.9), thanks to record gains in new business, while new export orders also rose at a survey-record pace given increases in both domestic and overseas demand. Services PMI also posted the fastest rate of output growth for 24 years, while prices changed increased at a survey-record pace.

Asia Pacific:

  • China’s official NBS manufacturing PMI moved down slightly to 51 in May, the lowest reading since Feb and from 51.1 in Apr. New orders grew the least in twelve months (51.3 from 52.0 in Apr) and export sales shrank for the first time since Feb (48.3 from 54.0). Non-manufacturing PMI rose to 55.2 in May (Apr: 54.9), the 14th consecutive month of growth. Export orders however fell for the second month (47.6) and employment contracted (48.9).
  • Caixin manufacturing PMI in China moved up a nudge to a 5-monht high of 52 in May from 51.9 the month before, with new orders rising the most since Dec 2020 and new export orders at a 6-month high. Caixin services PMI slowed to 55.1 in May (Apr: 56.3).
  • Retail trade in Japan declined by 4.5% mom in Mar hurt by the recent measures introduced to stop the spread of Covid19 infections. In yoy terms, sales were up by 12% and large retailer sales up 15.5%, mainly due to base effects.
  • Industrial production in Japan expanded by 2.5% mom and 15.4% yoy in Apr (Mar: 1.7% mom and 3.4% yoy). The ministry stated that industrial output is “picking up” and that firm demand for capital investment abroad led to robust output in sectors related to machinery and information technology, offsetting a contraction in cars and transportation equipment output.
  • Japan’s manufacturing PMI edged down to 53 in May (Apr: 53.6), but higher than the preliminary estimate of 52.5 for the month. Input cost inflation increased by the fastest pace since Oct 2018, while both output and new orders grew at a slower rate.
  • Overall household spending in Japan grew by a record high 13% yoy in Apr (Mar: +6.2%), partly due to the base effect from Apr 2020. In mom terms, spending nudged up by 0.1%.
  • India’s GDP increased by 1.6% yoy in the Jan-Mar quarter, following a 0.4% gain in the quarter prior. For the financial year 2020-21, GDP shrank by 7.3%, the worst performance since Independence (2019-20: 4.0%). Separately, the Reserve Bank of India kept policy rates unchanged: repo rate at 4% and reverse repo at 3.35% and stuck to its accommodative stance given the current wave of Covid19 while also stating that the current inflation readings are not “persistent”. The RBI further lowered its GDP growth estimate for the current fiscal year to 9.5% (from an earlier prediction of 10.5%).
  • Infrastructure output in India surged by 56.1% yoy in Apr (Mar: 11.4%), as the country was in lockdown in Apr 2020. In mom terms, basic infrastructure output declined by 15.1% given the current wave.
  • Singapore PMI eased to 50.7 in May (Apr: 50.9) – the 11th consecutive month of expansions. Slower increases were seen across the sub-indexes of new orders, new exports, factory output, and employment as Covid19 restrictions were imposed during last month.
  • Retail sales in Singapore declined by 1.3% mom in Apr (Mar: 3%) but rebounded by 54% yoy when its first “circuit breaker” was in place. Excluding motor vehicles, sales decline narrowed to 0.8% mom.

Bottomline: The “will they won’t they” taper debate continues ahead of the ECB meeting this week and the Fed next week: rates will remain unchanged, and for now, dovish comments along with statements of inflation being “transient” mean that bond buying will likely continue at the current pace. Global manufacturing PMI touched 56 in May (Apr: 55.9), the highest since Apr 2010, supported by an acceleration in new orders growth as restrictions are eased in US and Europe. Cost pressures however continue to intensify as does supply constraints. The UN FAO global food price index jumped by 40% yoy (and 4.8% mom) in May indicating an acceleration in inflationary pressures – hitting poorer nations that are more reliant on imports more severely. Transport and shipping costs are still on the rise, potentially leading to higher prices in the near future.

Regional Developments

  • Bahrain is in talks with banks over an international debt sale in H2 this year, reported Bloomberg. The nation had raised USD 2bn this Jan.
  • Investcorp, which manages USD 35.4bn of assets, announced plans to delist from the Bahrain Bourse as part of its long-term strategy.
  • Egypt’s PMI increased to 48.6 in May (Apr: 47.7), though remaining below-50 for the 6th consecutive month, thanks to upticks in both the output and new orders index.
  • Foreign-exchange reserves in Egypt increased to USD 3bn at end-May, the highest level since Feb 2020, and can cover about 8 months of imports.
  • Net foreign assets of Egypt’s banking sector fell by 0.9% mom to USD 17.382bn in Apr.
  • Iraq’s oil revenues stood at USD 5.9bn in May, with the average price of a barrel at USD 65.46 (Apr: USD 62.5) while oil exports were flat at 2.9mn barrels.
  • The Saudi Fund for Development (SFD) signed a deal with the National Bank of Iraq to set up a USD 10mn credit facility to help Iraqi businesses keen to import products and services from the K
  • Lebanon’s PMI touched a 19-month high of 47.9 in May (Apr: 47.1), thanks to slower declines in output and new orders. New export orders hit the 50-mark thereby ending 69-months of declines. Respondents highlighted the weakness of the Lebanese pound and a drop in purchasing power.
  • Depositors holding accounts active as of Oct 2019 in Lebanon would have access restored to USD 400 a month and its equivalent in Lebanese pounds from Jul 1st, the BDL stated on Fri, reversing an earlier decision. The money can be withdrawn from their dollar deposits in Lebanese pounds at a rate two and half times better than the official one. However, the Association of Banks in Lebanon stated that banks do not have the USD liquidity to comply.
  • The World Bank identified the ongoing crisis in Lebanon among the top three of the world’s worst financial crises since the mid-19th century. Real GDP is likely to contract by a further 9.5% this year, after having plummeted by 20.3% last year and 6.7% in 2019, a cumulative 38.4% since 2018. Read the report: https://documents1.worldbank.org/curated/en/394741622469174252/pdf/Lebanon-Economic-Monitor-Lebanon-Sinking-to-the-Top-3.pdf
  • Fiscal deficit in Oman touched OMR 827mn (USD 2.15bn) in Jan-Apr, with overall revenues down by 27.7% and net oil revenue down by 36.8%. Public spending fell by 2.7%.
  • Oman stated that more than 200k expats had left the country in the 12 months till Mar 2021, partly given the economic downturn and partly due to the nationalization policies.
  • Oman posted a 1.9% declined in electricity consumption last year – for the first time since the sector was restructured in 2005. Growth in power demand had averaged 4-6% annually.
  • Qatar’s non-oil PMI slipped to a 7-month low of 51.5 in May (Apr: 52.1): it recorded expansions in wholesale and retail sector (53.2), manufacturing (53.1), and construction (51.1) while services were below-50 (48.0).
  • More bank merger opportunities in the GCC: this time round, Commercial Bank of Qatar made an offer of OMR 49.43mn (USD 128mn) to acquire a controlling stake in the National Bank of Oman (up 15.2% from its current holding).

Saudi Arabia Focus

  • PMI in Saudi increased to 56.4 in May (Apr: 55.2), with a substantial increase in output sub-index (the quickest since end-2017) and new export orders (most since end-2015). Jobs increased for the 2nd straight month though the pace slowed vs Apr.
  • Saudi Arabia’s oil minister urged OPEC+ to monitor the oil demand on a monthly basis, given the ongoing improvement, also adding that it would be premature to talk about potential overheating.
  • Plans are underway for Saudi Aramco to return to global capital markets to help fund its USD 75bn dividend commitment, reported Bloomberg. Aramco may seek to raise USD 5bn.
  • The total value of shares purchased by foreign investors in Tadawul during May amounted to SAR 15.32bn (USD 09bn). Foreign investors account for 9.65% of total buying activity and 8.54% of selling activity last month.
  • Remittances from Saudi Arabia increased by 36% yoy to SAR 13.28bn in Apr, bring the 4-month total to SAR 50.7bn (+16.28% yoy). Saudi Arabia was the third largest source of remittances globally in 2020, just behind UAE and US.

UAE Focus

  • UAE’s PMI edged down to 52.3 in May (Apr: 52.7), remaining below the long run average of 54; though output and new orders expanded, it slipped from Apr numbers with the latter dominated by domestic sales as international orders decreased (given Covid19 restrictions at some export partner nations). Employment fell for the 4th consecutive month. Business expectations for the coming 12 months rose for the 6th month running.
  • Abu Dhabi completed a USD 2bn bond issuance with a seven-year tenor: the issue recorded the tightest yield ever by an emerging market sovereign and the lowest credit spread of all Abu Dhabi issuances across all tenors and its peak order book reached USD 6.9bn.
  • The Abu Dhabi Securities Exchange listed USD 1bn of bonds issued by Abu Dhabi Ports (which was 4X oversubscribed), supporting its bond market development strategy. The exchange also plans to launch a derivatives market later this year.
  • Liquid assets held by UAE-based banks increased by 2.6% qoq to AED 486.58bn in Q1 2021 and accounted for 15.9% of total assets, according to the central bank’s Core Financial Soundness Indicators report.
  • As of Thursday June 3rd, a total of 59 investors had taken steps towards full foreign ownership in the UAE after the amendment came into effect from June 1st.
  • The mandate of Dubai Industries & Exports has been expanded to develop the emirate’s industrial sector, hasten the diversification and global integration of local industry, promote industrial activities with high-added value and consolidate efforts to make it a centre for industries of the future.
  • The minimum wage for Sharjah citizens has been increased to AED 25k, up 43% from the current AED 17,500 after standard of living studies conducted with the Department of Social Services.
  • S&P affirmed Abu Dhabi’s “AA/Stable/A-1+” ratings and outlook, thanks to its strong fiscal position and expects real GDP to recover to 2019 levels only by 2023.
  • The Dubai Roads Authority (RTA) has successfully converted 50% of its Dubai Taxi fleet to be fully electric or hybrid and aims to reach 100% by 2027.

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