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MENA PMIs improve in May

Khatija Haque - Head of Research & Chief Economist
Daniel Richards - MENA Economist
Published Date: 03 June 2020



The UAE headline PMI rose to 46.7 in May from 44.1 in April.  The reading continues to signal a contraction in the UAE non-oil private sector last month, as output, new orders and employment all declined on a seasonally adjusted basis.  However, the rate of decline in May was not as steep as in April as restrictions on movement were eased and some non-essential businesses were allowed to re-open last month.

Employment continued to fall in May, although at a slower rate than in March and April, as firms sought to reduce costs and cut excess capacity.  Staff costs fell at the sharpest rate on record as firms retrenched some workers and implemented salary cuts for others. 

Supplier delivery times were only marginally longer in May compared to April, as pressures on supply chains eased.  Input costs rose slightly for the first time in three months, partly due to increased shipping costs, but as demand remained soft, firms were unable to pass on this increase and selling prices declined slightly once again. 

Firms posted a small increase in inventories in May for the first time in four months, as sales were expected to recover, but the level of optimism about future output was the lowest on record in May as panelists were increasingly concerned about the longer term impact of COVID-19 on demand. 


Source: IHS Markit, Emirates NBD Research

Saudi Arabia

The headline PMI remained in contraction territory in May but the easing of some lockdown restrictions meant the rate of contraction was not as severe as in April.  The output index rose to 47.5 in May while the new orders index improved to 45.4. 

Employment in the non-oil private sector declined for the third consecutive month in May as firms sought to cut costs and responded to softer demand conditions.  This was more evident in the staff costs index though, which fell more than 5 points to 40.3, the lowest reading on record and signaling a sharp decline in wages in May.  More than 20% of firms reported lower payroll costs last month as firms agreed wage cuts with workers. 

Both purchasing activity and stocks of inventories declined again in May, although to a smaller degree than in April.  Suppler delivery times lengthened as well, but not as severely as in April.  Although input costs were fractionally higher, selling prices declined for the fourth consecutive month as firms responded to weak demand conditions by offering discounts and promotions.

The future output index improved to 53.2 in May, the highest reading for this component of the survey in three months.  However, the level of optimism remains well below the series average of 67.3, with many panelists concerned about the pace of recovery even as COVID-19 restrictions are eased.

Saudi Arabia PMI

Source: IHS Markit, Emirates NBD Research


Egypt’s PMI rose to 40.7 in May, compared to the series low of 29.7 in April, indicating that the contraction in the non-oil private sector has slowed somewhat. This is in keeping with government lockdown measures relating to curbing the spread of the coronavirus, which were imposed most stringently towards the end of March and through April, but which began to ease last month, with hotels allowed to open for domestic customers for example. Nevertheless, the index remains far off the 2019 average of 49.1, and far below the neutral 50.0 level, indicating that the non-oil private sector continues to contract at a fair clip.

Of concern for domestic demand, household spending power in Egypt is likely to come under pressure judging by responses to the survey. Staff costs declined at the fastest pace on record while head count declined at the fastest pace since 2016. The one positive from this is that the associated savings for businesses may help firms weather this present storm, especially when taking into account that overall input prices declined for the first time in the series history, thereby further relieving some pressures on margins.

Looking ahead, new orders declined at a slower pace than that seen in April, but still at a faster pace than any other month since 2012. New export orders also remained weak, and will likely remain so given the ongoing closures in Europe, albeit ones that are gradually easing. Within such an environment, with no end in sight as yet for the pandemic and renewed fears over the potential effect of a US-China trade war and its fallout on Egypt, it is little surprise that business optimism weakened in May compared to April.

We would note than even before the coronavirus pandemic, the private sector has been a laggard in Egypt’s growth recovery, and this has been reflected in the PMI survey and its struggles to achieve and maintain a positive reading over 50.0. However, there is some renewed cause for optimism looking ahead, as planning minister Hala al-Saeed said in May that a new standby agreement currently being discussed with the IMF would likely come with a focus on the private sector, looking to cut red tape and support growth there. Should this be realised and implemented in full, then we could expect to see more 50.0-plus readings in the survey once the current crisis has passed.

Egypt PMI

Source: IHS Markit, Emirates NBD Research