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Khatija Haque - Head of Research & Chief Economist
Daniel Richards - MENA Economist
Published Date: 05 December 2021
Saudi Arabia’s headline PMI slipped to 56.9 in November from 57.7 in October, as all the key components showed a slower rate of expansion last month. Output and new orders increased at a sharp rate but slowed slightly from October. Export demand improved with new export orders rising at the fastest rate since May.
As in previous months, the strong demand and growth in new orders has not translated into significantly faster employment growth in the private sector; the employment index rose slightly to 50.9 last month from 50.3 in October.
Price pressures remain relatively contained, with purchase costs rising at a slightly slower rate than in October and staff costs declining fractionally for the fourth consecutive month. Firms are passing on their modestly higher input costs to buyers, with selling prices rising for the eighth month in a row. Supplier delivery times continued to improve in November.
Firms remained optimistic about their future output in November, but the degree of optimism was the lowest in three months as firms remained cautious about the strength of the economic recovery and the evolution of the pandemic. Flash estimates for Q3 GDP showed non-oil sector GDP growth slowing to 6.2% y/y in Q3 from 8.4% y/y in Q2, and we expect a further softening in Q4 off last year’s high annual base. Overall, we expect the non-oil economy to grow 5.0% in 2021.
Source: IHS Markit, Emirates NBD Research
Egypt’s headline PMI reading stayed static at 48.7 in November, the twelth consecutive sub-50.0 reading. The global supply chain issues and rising prices that have weighed on the recovery of developed and emerging economies around the world continues to weigh on Egyptian activity, and new orders declined for the third month in a row. Firms cited rapid price growth as constraining their ordering, and elevated energy prices will have continued to exert pressure in November. The higher prices have weighed on business optimism as firms anticipate more inflation to come, and only 22% of firms expected an improvement in conditions in 12 months’ time.
It seems apparent that domestic conditions weighed on orderbooks last month, as export orders rose in November following two months of sharp declines. Respondents to the survey cited constrained global competitors as having contributed to the rebound. However, output in Egypt also fell, with firms citing not only a drop in orders, but also difficulties in sourcing inputs. This is also reflected in longer supplier delivery times and a decline in firms’ stocks of purchases for the fourth month in a row, as companies either could not source new materials or chose to run down existing stock rather than pay the higher current market prices.
The decline in output and new orders has weighed on the labour market, and the employment index contracted for the first time since June, albeit at a modest rate. Combined with more pricing pressure being passed on to consumers – the rise in output prices was only a little slower than seen in October when it hit a 38-month high – domestic demand in Egypt will likely remain under some pressure for the time being, even as we expect an ongoing recovery from the pandemic crisis. While y/y CPI inflation dipped in October, it remained relatively high compared with recent averages and the responses to this PMI survey suggest that that inflation will remain elevated over the coming months.
The UAE's November PMI will be released on Tuesday 7 December.
Regional PMIs held up well in July
Dubai PMI at three-year high
PMIs show rising input costs in MENA