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Khatija Haque - Head of Research & Chief Economist
Daniel Richards - MENA Economist
Published Date: 05 April 2021
The UAE’s purchasing managers' index (PMI) rose to 52.6 in March from 50.6 in January, and was the highest reading since July 2019. The main driver was a sharp rise in business activity, likely reflecting increased confidence and spending on the back of the UAE’s Covid-19 vaccine rollout, as well as a resumption of construction projects. New order growth was also slightly faster than in February, again reflecting improved domestic demand, with new export orders largely unchanged.
The pick-up in business activity did not lead to increased hiring in the private sector however, with the employment index slightly below the neutral 50-level in March. There appears to be some supply side constraints emerging, with suppliers’ delivery times increasing for the second month in a row, and purchase costs rising at the fastest rate in almost two-and-a-half years. Firms noted that transport costs have increased on the back of a global container shortage and higher shipping charges. However, higher input costs were largely absorbed by firms, as selling prices decreased slightly in March.
Encouragingly, business optimism improved in March, with this sub-index rising to 54.0, the highest level in eight months, as firms anticipate a further easing in Covid-19 restrictions in the coming months.
Source: IHS Markit, Emirates NBD Research
Saudi Arabia’s headline PMI was slightly lower in March at 53.3, down from 53.9 in February. Output growth remained solid but new order growth slowed, as new export orders declined for the first time in six months. Backlogs of work declined at the fastest rate in nine months in March, and this likely supported business activity.
As in the UAE, suppliers’ delivery times and purchase costs increased in March, but selling prices declined slightly due to competitive pressures and the need to clear old stock. Firms in Saudi Arabia were the least optimistic about their output in a year’s time since June 2020, with only 11% of firms surveyed in March expecting their output to be higher in a year’s time.
Source: IHS Markit, Emirates NBD Research
Egypt’s headline PMI number slipped to a nine-month low of 48.0 in March, the fourth-consecutive sub-50.0 reading. This was the lowest reading since the recovery from the initial Covid-19 slump began last year, and reflects the pressures that the virus continues to exert, not only domestically but also in terms of Egypt’s trade partners. Indeed, new export orders fell at the fastest pace since May last year, in sharp contrast to the record expansion seen the previous month. New domestic orders were also soft, with total new orders contracting for the fourth month in a row.
The employment sub-index recorded a 17th straight month of contraction, although firms continued to cite a number of voluntary leavers, which would chime with the fact that the official unemployment rate in Egypt has fallen to record lows of 7.2%, after rising to 9.6% at the peak of the pandemic crisis in Q2 2020. Staff costs meanwhile rose above the neutral level for the first time in three months, suggesting that there has been some salary increases, albeit marginal.
Suppliers’ delivery times lengthened for the fourth month in a row in March. Purchase costs increased over the previous month but at a slower pace to that seen in February, and this was passed through to output prices, although the increase compared to February was only slight and inflationary pressures in Egypt should remain relatively muted.
The ongoing rollout of vaccinations programmes domestically and around the world has led to fairly buoyant future expectations, which rose to the highest level since July last year, which was itself a multi-year high. Only 1% of respondents anticipated a decline in business over the next 12 months.
UAE and Saudi PMIs slip in February
Dubai PMI slips to 49.9 in October
PMIs: UAE reading disappoints