Service activity contracts again in May, PMI at 12

Service activity contracts again in May, PMI at 12

An empty highway leads past the Burj Khalifa skyscraper, center, and other office buildings on the city skyline during the coronavirus lockdown in Dubai, United Arab Emirates, on Friday, April 24, 2020.

The headline PMI measures manufacturing conditions through the weighted average of five indices: new orders (30%), output (25%), employment (20%), suppliers' delivery times (15%) and stocks of purchases (10%). "This result is particularly poignant given the record contraction in April which was driven by widespread business closures", said Eliot Kerr, economist at IHS Markit.

Although slightly improved from April sub-indexes tracking domestic and foreign demand remained perilously close to zero, leading firms to reduce their workforce at the second sharpest pace since the survey began late 2005.

Lockdown measures worldwide have notably reduced exports, and limited input supply.

"The private sector Caixin manufacturing PMI unexpectedly expanded in May as it rose 1.3 points to 50.7 from 49.4 in April, outperforming market consensus for another month of contraction". Export sales in the UAE fell in May, but at a softer rate, while the lifting of travel restrictions helped deliveries, he added. "Until we see a sustained improvement in demand, manufacturing conditions are likely to remain fragile".

"Industry is likely to have seen an initial jump from the easing of lockdown restrictions".

"Firms hoped that the introduction of new products would also drive activity higher", it said.

The market-research firm's Caixin China General Manufacturing Purchasing Managers Index (PMI) posted an overall reading of 50.7, up from 49.4 in April, returning to expansion territory. Its PMI reading was 50.6, down from 50.8 in April.

"Although the headline figure rose from April's unprecedented low of 5.4, it remained at a level which, prior to the coronavirus pandemic, was unparalleled in over 14 years of data collection and pointed to an extreme drop in services activity across India", HIS Markit said in the report.

"Meanwhile, China's official non-manufacturing PMI continued to improve, rising to 53.6 in May from 53.2 in April for a more optimistic outlook of services demand in China".

The latest data collected in Saudi Arabia between 12-21 May also shows a decline in new order volumes across the private sector economy due to worsening global economic conditions and spending cutbacks.

Business activity across India's service sector continued to contract in May as Covid-19 led shutdowns impaired business operations, restricted consumer footfall and led to a demand collapse along with job cuts.

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