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UAE, KSA PMIs slip in August

Khatija Haque - Head of Research & Chief Economist
Daniel Richards - MENA Economist
Published Date: 05 September 2021


The UAE headline PMI slipped to 53.8 in August from 54.0 in July, despite stronger growth in business activity and employment.  The employment index rose to 51.6, the highest reading since January 2018.  New orders rose at a solid pace last month, despite continuing weakness in export demand, providing further support to the view that domestic demand is rebounding in the UAE after a slow start to the year.

Input costs rose modestly for the seventh month in a row, with firms citing higher fuel and raw materials costs, but supplier delivery times shortened slightly in August.  Selling prices were only fractionally lower in August and have been broadly stable over the last four months. On average, firms were cautiously optimistic about the outlook for the coming 12 months, but uncertainty about the coronavirus impact is still weighing on sentiment, and the future output index remains well below the historical average.

UAE PMI and survey components

Source: IHS Markit, Emirates NBD Research


Saudi Arabia’s PMI also declined in August to 54.1 from 55.8 in July on slower output and new order growth, although both components pointed to solid expansion last month.  New export orders also increased at the slowest rate since May. Private sector employment was broadly unchanged in August, as it was in July, with staff costs declining fractionally.

Overall input costs rose slightly again in August with firms appearing to pass on these higher costs to buyers – output prices rose at the fastest rate since August 2020, when higher VAT and customs duties were reflected in selling prices.   

Saudi Arabia PMI and survey components

Source: IHS Markit, Emirates NBD Research


Egypt’s headline PMI number came in just shy of the neutral 50.0 level in August, ticking up to 49.8, from 49.1 the previous month. While this was the ninth consecutive month of contractionary readings, there were some positive takeaways from the survey, not least that both output and new orders were positive. An improvement in the tourism sector was cited as one of the reasons for the rise in orders, and we would expect this to continue through the remainder of the year, provided the spread of the Delta variant does not result in renewed travel restrictions in Europe, as already seen with regard to the US. Over half (53%) of respondents expect an improvement in business conditions over the next 12 months.

Employment also came in above the 50.0 level, albeit marginally, for the second month in a row. This is the first time since 2019 that there have been two consecutive months of employment gains. However, staff costs turned negative once again after five positive readings, suggesting that firms are looking to protect their margins as purchase prices rise sharply. These were at a two-year high as Egyptian firms faced the same challenges as manufacturers around the world – namely rising global prices for materials such as iron and timber, and ongoing challenges with shipping costs. Firms are also pushing some of these rising costs onto their customers, as output prices accelerated at a three-year high. Nearly one tenth of respondents reported hiking their prices, with implications for the headline CPI figure, reaffirming our belief that the Central Bank of Egypt has reached the end of its cutting cycle.