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GCC PMIs decline from recent highs in September

Daniel Richards - MENA Economist
Published Date: 05 October 2022


The latest S&P Global non-oil private sector surveys for the UAE and Saudi Arabia indicate that the GCC remains a global outperformer at present, with regional indices remaining firmly in expansionary territory while developed markets have increasingly started to indicate contractions in surveys released earlier in the week.


While the UAE’s PMI declined slightly in September, falling to 56.1, this was down from the 38-month high of 56.7 the previous month, and it remains a strong reading both when compared to the current global picture, and to the long-run series average. We recently revised up our real GDP growth projection for the UAE to 7.0% from 5.7% previously, and while much of this was driven by the outlook for the oil economy, we also revised up our non-oil sector growth forecast from 4.1% to 4.7%.

Looking at the subcomponents for the UAE’s PMI survey, output came in at a three-month low but remained high, and with new orders still strong – nearly a quarter of respondents noted growth in new business – it is likely to remain so over the coming months. Export orders accelerated compared to August, but at a slower pace compared to total new business, suggesting that the key driver remains strong domestic demand. This is likely being supported by ongoing discounting by firms; output prices were below 50.0 once again as businesses sought to retain competitiveness.

Firms’ margins will have been better protected in this discounting than they have often been in recent surveys as the pace of input price growth has slowed sharply compared with earlier this year. While purchase prices turned positive once again after August’s decline, the increase was marginal. Firms attributed the higher prices to supply shortages for raw materials. Staff costs did rise once more but again at only a marginal level. Firms are spending money on new employees, however, with job creation positive for the fifth month running as businesses sought to keep up with new orders. Backlogs of work continue to mount, albeit at a slower pace than seen in July and August. 

UAE PMI and key survey components

Source: S&P Global, Emirates NBD Research

Saudi Arabia

There was a similar trend in Saudi Arabia’s S&P Global PMI survey to that of the UAE, as the headline survey and most subcomponents came in moderately weaker compared to the previous month but remained nevertheless robust. The headline reading for KSA came in at 56.6 in September, down from 57.7 in August. Non-oil GDP grew 6.8% y/y in Q2, and the solid readings on the PMI over the three months of Q3 indicate that it will have remained strong even as the central bank tightened, supporting our projection of a headline real GDP growth rate of 7.7% this year.

Both total new orders and export orders remained high in September even as they came in slower than seen over the previous two months, which should support output over the next quarter. In anticipation of this, and the risk of rising prices, firms continued to stockpile goods in September, albeit at a slower pace, and the quantity of purchases also expanded once again. Firms remain positive on the back of good pipeline work, but the expectations of future output subcomponent has slipped to the weakest level since May.

In terms of prices, purchase costs accelerated again in September after declining over the previous two months, with firms citing the global inflationary pressures. This led to an acceleration in overall input prices, even as staff costs slowed for a second month running. Businesses continue to pass on these higher input costs to customers, and the pace of output price rises rose once more in September, but firms are conscious of trying to remain competitive and have tried to absorb some of their higher costs themselves.


S&P Global’s PMI for Egypt was unchanged in September, coming in at a contractionary 47.6 for the second month running. Egypt’s PMI has remained below the neutral 50-level since December 2020, although it should be noted that the Central Bank of Egypt maintains that real GDP growth (preliminary 6.6% y/y in the year ended in June) has of late been driven by the private sector, ‘particularly non-petroleum manufacturing, tourism, and trade.’

Drilling down into the subcomponents of the survey there remain indications of an economy under pressure, with a decline in export orders that was amongst the steepest in the series. New orders in total declined at a shallower pace than in the previous months, however, indicating that domestic orders were under less pressure than their international counterparts even as respondents cited high prices as a determining factor in slower activity. In September, only 8% of firms reported a rise in output, while 16% said that output had declined citing energy rationing, persistent issues with sourcing parts amidst supply chain disruptions and weaker demand.

In terms of expenses for businesses, input prices picked up once again after slowing in July and August. Both purchase costs and staff costs accelerated with higher materials and energy prices driving purchases amidst global pressures and a depreciating currency, while firms raised wages slightly as employees experienced a rising cost of living. Despite these pressures on businesses’ margins, employment rose for the third month in a row. Firms passed on some of their higher costs to buyers, increasing their output prices at a faster pace than in August. This will likely keep upward pressure on the headline CPI figure for Egypt, which came in at a near four-year high of 14.6% last month.

Businesses remained optimistic on average but the future output index remained low when compared to the series average, even as it ticked up marginally compared to the August reading. Only a little over a tenth of respondents anticipate a rise in output over the next year. We forecast real GDP growth of 4.1% in the present fiscal year.

Egypt PMI and key survey components

Source: S&P Global, Emirates NBD Research