Gulf Non-Oil PMIs Rise in September as Egypt Slips Back Into Contraction

Non-oil private sector activity held up across much of the Gulf in September, with purchasing managers' index readings for Kuwait, Saudi Arabia and the UAE all staying above the 50 mark that separates expansion from contraction. Egypt moved the other way, dropping into a deeper downturn.

UAE holds at a 20-month high

The UAE's headline index was unchanged at 55.3, matching August's 20-month high and pointing to a marked monthly improvement in business conditions outside the oil sector. Firms gained more room on pricing and raised their selling charges at the fastest pace in more than 15 years, responding to higher input costs. Output rose quickly, and the extra work led companies to buy more inputs and take on staff. David Owen, principal economist at S&P Global Market Intelligence, said demand strengthened at home and overseas, with new export business growing at the fastest rate in close to two years. Output growth was the quickest since February.

Dubai's index edged up to 54.5 from 54.1, a solid improvement driven by a sharp and accelerating rise in output — the fastest so far this year.

Kuwait and Saudi Arabia keep expanding

Kuwait's index eased to 52.4 from 53.6, staying above 50 for a third month running. Firms credited marketing campaigns and competitive pricing with helping them win new work. Output and new orders both grew for a third consecutive month, though more slowly than in August. Sentiment about future activity improved for a third month and reached its highest level since February, with business confidence at a seven-month peak.

Saudi Arabia's index climbed to 55.3 from 53.8, the sixth straight month of improving conditions in the non-oil economy. New orders drove the gain, rising at the fastest pace since February, while output growth slowed to a five-month low. Naif Al-Ghaith, chief economist at Riyad Bank, said employment and purchasing activity also strengthened, indicating that companies were adding capacity in response to better domestic demand and preparing for continued activity.

Expectations weakened, however, as firms flagged regional tensions and the prospect of further supply chain disruption. Companies surveyed said instability in the region had caused shipping delays in some cases.

Egypt reverses

Egypt's index fell to 47.2 in September from a seven-month high of 49.6 in August, dropping below its long-run average of 48.2 and signalling a solid, accelerating decline in overall business conditions. Output and new orders both contracted. Owen said the September figures took some of the shine off August's improvement, but that other parts of the survey still pointed to resilience among Egyptian businesses. Outstanding work rose for a fifth month in a row, and firms stayed optimistic, expecting output to increase over the next 12 months.