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Regional PMIs strengthen in October

Daniel Richards - MENA Economist
Published Date: 03 November 2022



The S&P Global PMI for the UAE continued to show robust health in October as the headline figure rose to 56.6, up from 56.1 the previous month and only just lower than the multi-year high hit in August. Most sub-indices of the survey were illustrative of an economy that is expanding sharply, and indeed, we recently revised up our UAE real GDP growth forecast for 2022 from 5.7% to 7.0%, in part on the oil sector but also on the back of the non-oil economy’s performance. While rising interest rates – a further 75bps on November 2 as the UAE central bank followed the Fed’s lead – will likely start to constrain growth in 2023, when we forecast a slowdown to 3.9%, this has not manifested to date.

UAE PMI and key survey components

Source: S&P Global, Emirates NBD Research

Looking at the sub-indices for the UAE, output expanded at a faster pace than the series average once again in October, coming in at the second highest in three years as client demand rose. This was backed up by higher new orders, with the upcoming FIFA World Cup given as one key factor in driving demand. However, new export orders slowed as deteriorating global conditions weighed on demand from abroad.

As firms looked to deal with the mounting levels of demand and output, they hired at the fastest pace in over six years in October. Nevertheless, backlogs of work grew at the fastest pace in three months and one of the fastest in the series as firms struggled to cope with demand.

Prices rose once more in October, but at a far slower pace than seen several months ago. The lower cost of fuel softened input prices, although this might tick up once more in the coming surveys given the 10% rise in petrol prices announced last week. Staff costs rose modestly but at a slower pace than in September. Nevertheless, discounting continued as firms looked to remain competitive, albeit at the slowest pace since July. Despite the strong present conditions, UAE firms remained fairly ambivalent with regards the next 12 months with only around 14% of respondents expecting higher output.

Saudi Arabia

The Riyad Bank PMI survey for Saudi Arabia rose to 57.2 in October, up from 56.6 the previous month and indicating an ongoing robust expansion in the non-oil private sector this year. New projects helped output accelerate compared to September, while higher new orders and new export orders should help workflow to continue at a strong pace. Business optimism rose to the highest level seen since January 2021 on the back of this as firms anticipate ongoing growth in new work, with the construction and manufacturing sectors especially optimistic. Backlogs of work fell in October, with employment still ticking up, although the pace of hiring has slowed.

Saudi Arabia PMI and key survey components

Source: Riyad Bank, Emirates NBD Research

In terms of prices, inflation in input prices was the slowest since February as some of the global commodity price spikes eased off – for purchase prices, only 4% of respondents noted higher costs for their raw materials in October. Staff costs, meanwhile, contracted as the subcomponent came in marginally below the neutral 50.0 level. In contrast to firms in the UAE, Saudi Arabian companies have been passing higher prices on to customers on the aggregate, with output prices rising once more, albeit at a slower pace than the several months, and some firms did cite discounting in order to remain competitive.


The S&P Global non-oil private sector PMI survey for Egypt showed a marginal improvement in October as it rose to 47.7, from 47.6 the previous month. Nevertheless, it has been two years now that the survey has been in contractionary sub-50.0 territory, although GDP growth has remained positive on the back of public sector and energy projects.

Output contracted at a slightly slower pace than in September, while new orders declined again in October, with domestic orders crimped by ongoing import controls which had caused customers to cancel. Sourcing supplies has been an issue for firms given the shortage of FX availability for imports, but the recent communiqué from the CBE stated that the removal of the necessity of letters of credit for import finance, which could ‘serve as a catalyst for the rejuvenation of economic activity in the medium term.’ The depreciation in the currency could also serve to boost exports, and new export orders already contracted at a much slower pace in October compared to September.

Monetary policy has  been tightened with an unscheduled 200bps hike, with more likely to follow, while a renewed fall in the EGP – as the central bank commits to a ‘durably flexible exchange rate’ – will keep inflationary pressures to the fore. According to the survey, the pace of increase of input prices slowed modestly in October compared to the previous month but it remains well above the two-year average. Respondents cited the strong dollar as having an effect and this will now be exacerbated in the coming months. Firms are passing these prices on to consumers where they can, and although fewer firms are raising selling prices compared to those that are paying more for their input products.

In this environment, only 4% of respondents to the survey had a positive outlook for the coming 12 months, and the (private sector) business optimism subindex fell to the lowest level in over a decade. The announcement of a new agreement with the IMF last week means there is now greater certainty around international financial support and a commitment to a flexible exchange rate, but the coming months will likely remain challenging for Egyptian businesses.

Saudi Arabia PMI and key survey components

Source: Emirates NBD Research