Regional PMI round-up: A mixed bag in November

The UAE’s headline PMI remained at 49.5 in November, marking the third month out of the last four that the index has been below the neutral 50-level.  Private sector business activity/ output declined in November for the first time since May, as firms noted that demand conditions “remained subdued” and that business was slow to return to normal according to IHS Markit.  New orders increased slightly in November, despite a modest decline in export orders which coincided with renewed lockdown restrictions across Europe and the UK.  

Employment in the private sector declined again in November although the rate of decline was the softest since June.  Staff costs also fell slightly for the second month in a row.  There is little sign of inflationary pressure as input costs were fractionally lower on average in November, and firms again lowered selling prices; although the decline in selling prices was the smallest since June. Another indicator of excess capacity in the private sector was the decline in the backlogs of work for the third month in a row.

Firms reduced their purchasing activity in November and instead drew down on inventories for the third consecutive month.  Firms were also more pessimistic about their future output in November than they have been since the series began in 2012.  The rise in the number of coronavirus cases locally and uncertainty about how long the pandemic’s impact would last were the main concerns weighing on the outlook, although some firms were hopeful that Expo 2020 and recovering tourism would boost output next year.    

We retain our forecast for real GDP at -6.9% in 2020, and we expect growth to recover to 1.9% in 2021.

UAE PMI

Source: IHS Markit, Emirates NBD Research

Saudi Arabia’s PMI rose to 54.7 in November from 51.0 in October and was the highest reading since January 2020.  Output and new work rose at a faster rate and employment was slightly above the neutral 50-reading for the first time since the pandemic.  Both input costs and output prices increased in November at the fastest rate since July.  Firms increased their quantity of purchases and stocks of inventories rose at the fastest rate in four months.

Encouragingly, panellists were more optimistic about their future output than they have been since the start of the year, as the prospect of an effective vaccine and further easing of restrictions have improved the outlook. 

Egypt’s PMI slipped to 50.9 in November from 51.4 in October as output and new orders increased at a slower rate.  Export orders increased again in November, but at the slowest rate since July.  Private sector employment declined last month, but at the slowest rate since October 2019. Cost pressures eased as both purchase costs and staff costs increased at a slower pace. 

Firms were increasingly concerned about the second wave of Covid19 infections in Europe weighing on the global recovery, according to IHS Markit. Only 12% of firms surveyed expected their output to be higher in a year’s time.

Qatar’s PMI rose to 52.5 in November from 51.5 in October on faster output and employment growth.  New orders also increased in November, but at a slightly slower rate than in October. Backlogs of work increased for the second month in a row, but there is little evidence of inflationary pressure in the PMI survey with input costs only slightly higher last month and selling prices slightly lower.