06 December 2022
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Saudi Arabia PMI figures indicate strong business conditions

By Jeanne Walters

Business conditions in Saudi Arabia improved sharply in November as output grew at the fastest pace in more than seven years, while new order growth was the strongest in over a year. The headline Riyad Bank PMI rose to 58.5 in November from 57.2 in October. Domestic demand remained robust while new export orders rose at the sharpest pace since 2015. The increase in output helped to reduce the backlogs of work even as new orders increased last month. However, employment at private sector firms was only fractionally higher despite the strong increase in activity and new work in November. Firms were also optimistic about the outlook for next year on expectations that projects and government spending would support domestic demand.

US factory orders rose 1% m/m in October. This was better than the 0.7% that had been widely expected and in contrast to rising only 0.3% m/m in September. Durable goods rose 1.1% on the month, driven by growth in transportation equipment.

Eurozone retail sales fell sharply in October, declining by 1.8% m/m after having increased 0.4% m/m in September. The fall was very slightly weaker than consensus expectations of -1.7% m/m. On a country basis, the falls were largest in Germany and France. 

Final PMI readings were released for France, Germany, the Eurozone and the UK. The final data releases confirm the earlier flash estimates suggesting that there was a contraction in private sector output in November, for each of these areas. The Italian flash composite PMI posted a 5th successive reading below the neutral 50-mark.The index hit 48.9 in November - this was however up from 45.8 in October. Despite weak demand Italian firms continued to hire in November with the job creation rate hitting a four-month high. Prices eased on the month but remailed at historically high levels. Both the services and manufacturing sub-components remained in contractionary territory. There was however a notable easing in the downturn in the services PMI, reaching 49.5 in November up from 46.4 in October.

Turkish CPI inflation came in at 84.4% y/y in November, down from 85.5% y/y the previous month. This was the first time that inflation had slowed since May 2021, with core inflation also slowing, from 70.5% y/y to 68.9% y/y. The slowdown was broadly anticipated given base effects and a more stable currency, but with PPI inflation still high at 136.0% y/y (albeit down from 157.7% y/y in October), there remain pressures in the pipeline. The next central bank MPC meeting is scheduled for December 22 – a series of rate cuts over recent meetings have taken the benchmark one-week repo rate to 9.0%, leaving real rates deeply negative.

A further uptick in the Indian S&P composite PMI in November marks the 16th consecutive month of the index being in expansionary territory. The November reading reached 56.7, from 55.5 in October. The strength of the readings points to a continued expansion in private sector activity, driven by a recovery in domestic demand. Output increased amongst both manufacturers and service sector firms.

The UAE is to begin talks with Ukraine with the aim of agreeing an economic deal to increase trade between the two nations. The talks are important from a food security perspective, with Ukraine historically being an important source of grains for the Middle East. In 2021 the two countries had roughly USD900m in bilateral trade, but the war in Ukraine has meant this has fallen off in 2022. The UAE’s role as a global trade hub means that any such deal could facilitate easier transit of grains into other MENA markets. This is agreement is part of a wider strategy for targeting trade growth, with talks also underway or deals already signed with countries such as India, Turkey and Israel.

The RBA hiked its benchmark cash rate by 25bps this morning, in line with expectations as the Australian central bank moved closer to the end of its hiking cycle. The bank did signal further tightening to come but highlighted that it expects inflation to peak in the fourth quarter.

Today’s Economic Data and Events

  • 11:00 German factory orders Nov: forecast 0.1% m/m
  • 13:30 UK S&P/CIPS UK Construction PMI Nov: forecast 52
  • 17:30 US trade balance Oct: forecast -$80bn

Fixed Income

  • US Treasuries came off later in the session in response to the better than expected ISM services print for November pushed back against recession worries. The 2yr UST yield jumped nearly 12bps to 4.3874% while the 10yr UST yield added 9bps to 3.5736%. Markets will be looking to next week’s FOMC meeting and release of new economic projections, including a revised dot plot, to assess how much higher rates will be heading, even if they will be on a shallower climb.
  • European bond markets closed mixed overnight with 10yr bund yields up 3bps at 1.873% and the 10yr gilt falling 5bps to 3.094%.
  • The UAE issued its latest tranche of treasury bonds at the start of the week, raising AED 750m in 3yrs at UST+18bps and AED 750m in 5yrs at UST+30bps.


  • Currency markets started the week on a roughly dollar-offered bias but then sank later in the session in line with a broader move downward in markets. The DXY index added 0.7% overnight with gains coming at the expense of all peer currencies. EURUSD dropped 0.4% to 1.0491 while GBPUSD fell 0.7% to 1.219. USDJPY unwound some of the yen’s large gains last week, adding 1.8% overnight to 136.75.
  • Commodity currencies closed uniformly weaker. USDCAD added 0.9% to 1.3588 while AUDUSD dropped by 1.4% to 0.6698 and NZDUSD fell 1.3% to 0.6317.


  • Further easing of Covid-19 restrictions in China prompted strong gains on the Hang Seng to start the week as the index added 4.5%, following on from the 6.3% w/w gain seen on Friday. The index is now up 11.7% w/w, although it remains -16.6% down from where it started the year. The Shanghai Composite added 1.8%, but conditions elsewhere were more mixed. Japan’s Nikkei added 0.2% while South Korea’s KOSPI closed -0.6% lower.
  • The optimism from China did not carry on into Europe’s trading day as focus turned to the data out of the US at the close of last week and the services data out yesterday, and what it meant for the path of inflation, and thereby rates. While the UK’s FTSE 100 eked out a 0.2% gain, the CAC dropped -0.7% and the DAX -0.6%. In the US the losses were more pronounced with the Dow Jones, the S&P 500 and the NASDAQ losing -1.4%, -1.8% and -1.9% respectively.
  • Locally, the DFM added 0.8% while the ADX by contrast ended the day -0.8% lower.


  • Oil prices started the week on a strong footing with supply looking to remain flat following the OPEC+ meeting and the imposition of a price cap on Russian oil. But the general risk-off rally that took hold of markets overnight saw prices fall sharply later in the session, unwinding all of the gains recorded earlier in the day.
  • Brent futures had moved close to USD 89/b but then ended the day at USD 82.68/b, down 3.4%. WTI futures fell 3.8% to USD 76.93/b after having risen to nearly USD 83/b. Whether this inverse reaction to positive economic data from US—which should be good for oil demand—continues is uncertain. More meaningful will be any news coming out from China on further opening of the economy.

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Written By

Jeanne Walters Senior Economist

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