Regional PMIs rise in February

UAE

The UAE PMI rose to 54.8 in February from 54.1 in January, as output and new work increased at a faster rate.  New export orders also increased, likely reflecting a recovery in international travel. However, employment in the private sector was largely unchanged in February, which may have contributed to increased backlogs of work.

Supplier deliver times shortened for the fifth consecutive month, and while input costs did rise in February, the rate of increase was low compared with most of the larger developed economies. Purchasing activity increased at the sharpest rate since August 2019 which may reflect increased business optimism or concerns about future price increases. Firms on average reduced selling prices in February but the decline was marginal.

UAE PMI and key survey components

Source: IHS Markit, Emirates NBD Research

Saudi Arabia

The Saudi PMI rose to 56.2 from 53.2 in February on faster output and new work growth. However, this seems to be largely due to domestic demand as new export orders declined again last month. Employment increased slightly in February, but not nearly as fast as the rise in new orders and activity. Firms in Saudi Arabia also saw price pressures ease in February, as input costs rose at the slowest rate in six months and supplier delivery times improved.  Selling prices were largely unchanged in February after rising in the prior months. Firms in the kingdom were the most optimistic about their outlook since January 2021.

Saudi Arabia PMI and key survey components

Source:  IHS Markit, Emirates NBD Research

Egypt

Egypt’s headline PMI survey reading ticked up modestly to 48.1 in February, from 47.9 the previous month, but the index remained in sub-50.0 contractionary territory for the 15th month in a row as concerns over the Omicron wave of Covid-19 and its fallout remained to the fore. Output contracted in construction, manufacturing and services, although there was the first expansion in wholesale and retail trade in over a year. New orders declined modestly for the sixth month in a row as new export orders turned negative once again following three months of expansion to January.

Meanwhile, price pressures continue to weigh on demand. Some of the upwards pressure on prices has moderated from recent months, with the pace of acceleration at a seven-month low, but firms are facing rising commodity and shipping prices nonetheless, and with the crisis in Eastern Europe, this is only likely to be exacerbated in the coming months. Firms tried to protect their margins to a degree by cutting staff costs as average salaries fell, but price rises were still passed on to consumers as output prices rose again – albeit at a slower pace than in January.

The price pressures and the ongoing Covid-19 pandemic were cited by survey respondents as future optimism levels sank to a series low in February. Only 11% of firms expected output to be stronger in 12 months’ time. Rising inflation will also be at the forefront of the CBE’s mind when it makes its rate decision on March 24. We anticipate that the MPC will hold rates one more time, but if the February CPI print surprises markedly to the upside, and core inflation continues to tick up, then it might take action sooner.