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Regional PMIs indicate price pressures

Daniel Richards - MENA Economist
Published Date: 09 May 2022



The UAE’s headline PMI reading slipped modestly in April, coming in at 54.6 compared with 54.8 in both March and February. The result was still strong compared with the recent pandemic period, but continued upwards price pressures are taking their toll on the outlook and business optimism slipped. We have forecast non-oil sector growth of 4.0% this year, from an estimate of 5.3% last year.

In the near term, the non-oil economy is still expanding at a robust rate, and output rose to a 2022 high last month as 23% of survey respondents reported an expansion in activity. New orders also remained robust, albeit expanding slightly slower than seen over the previous two months. Export orders appear to have been the primary driver of the growth here, with the subcomponent hitting a 15-month high as firms benefitted from the ongoing global reopening from the Covid-19 crisis.

UAE PMI and key survey components

Source: S&P Global, Emirates NBD Research

However, firms are being affected by the ongoing drive higher in prices and have started to pass this on to consumers. Input costs rose at the same pace as in March, but this was the fastest pace in over three years. Purchase costs continued to increase rapidly, while staff costs have also turned expansionary for the first time since September, although employment ticked down modestly after expanding in March, suggesting higher salaries rather than more hiring. Backlogs of work continued to mount, so firms could be pushed into a hiring spree down the line despite their wariness.

To now, firms had been largely absorbing these higher input prices themselves, citing the competitive landscape, but output prices ticked up in April for the first time in nine months. Should businesses increasingly try to pass these costs on to consumers then CPI inflation will remain elevated – we recently revised up our average forecast for 2022 from 2.3% to 4.3%.

Saudi Arabia

Saudi Arabia’s headline PMI reading also ticked down in April, falling to 55.7 (56.8 in March). Output was at a three-month low, but nevertheless remained robust as nearly a quarter of respondents saw an increase in activity and new orders data – both domestic and foreign – suggested that growth would continue. Firms remained positive for the most part, but business optimism fell to the lowest level since January with respondents citing concerns around inflation.

Saudi Arabia PMI and key survey components

Source: S&P Global, Emirates NBD Research

Despite firms’ worries, price pressures were somewhat less pronounced in April as compared with March, led by a moderating increase in purchase costs which slipped back from the 19-month high the previous month. By contrast, staff costs ticked up more rapidly with the second consecutive month of expansionary readings. Some of this was driven by hiring, with the employment index turning positive again following March’s modest decline.

Saudi Arabian firms have had more pricing power than the UAE’s in recent months, and while the acceleration in output prices slowed compared with March, they hit the 13th consecutive 50.0-plus reading. Firms passed on their higher prices to customers, although the wholesale & retail sector saw a decline in prices.


Egypt’s headline PMI reading ticked up in April, rising to 46.9. However, while higher than the 46.5 the index sank to in March, it remains sharply negative, and the PMI survey has indicated a contraction in the non-oil private sector for 17 months in a row now, with the last 50.0-plus reading recorded in November 2020. With business conditions deteriorating amongst higher prices and ongoing supply chain dislocations, domestic investment and public sector activity are set to remain the primary drivers of GDP growth.

Egypt PMI and key survey components

Source: S&P Globall, Emirates NBD Research

Higher input prices are taking a toll on Egyptian businesses, and while purchase costs came back slightly from March’s levels, they remain very high. By contrast, staff costs were unchanged in April as firms looked to soften the blow to their margins, and employment contracted for the sixth consecutive month. Firms are passing on these higher prices to consumers where they can, and they rose for the ninth month in a row, but at a slower pace than seen in March and many firms are opting to keep prices unchanged. Egypt’s CPI reading for April is due out tomorrow and is likely to remain high following the 10.5% y/y hit in March.

In this environment, Egyptian businesses are seeing a demand hit and new orders remain strongly negative, albeit contracting at a slightly slower pace than in March when they hit a 21-month low. Business confidence did improve modestly compared with the series low seen last month, but it remains weak with only 15% of respondents expecting improved conditions in 12 months’ time.