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How Saudi + Egypt’s non-oil private sectors performed in August: Purchasing manager indices (PMI) tracking non-energy sectors in the two countries were bittersweet in August. Egypt rose above the 50.0 mark threshold for the first time in some four years, buoyed by growth in nearly all sub-indices, yet inflation rates jumped up causing a marginal drop in new orders. Saudi Arabia also held above the threshold, as new orders drove up purchasing, but softened output rates underpinned growth.
REMEMBER- The all-important 50.0 mark is the threshold separating contraction from growth. Anything above 50 denotes expansion, while anything below indicates contraction.
First up, Egypt: Non-oil activity in Egypt markedly rose, driven upwards by growing output levels, employment rates, purchasing activity and new exports, despite a rise in inflation rates due to a weakening in national currency value against the USD, according to S&P Global’s Egypt PMI (pdf). Egypt’s headline purchasing manager’s index rose noticeably to 50.4 in August, climbing up from 49.7 in July, indicating the first advancement in the health of the non-oil private sector in almost four years.
Overall output levels grew for the first time in exactly three years, as demand stabilized, on the back of rising new exports and easing marco-economic conditions. “Business expectations were also up, adding to signs that firms are hopeful that economic conditions are set to be more stable,” S&P Economist David Owen noted.
Firms are boosting operations for the first time in three years, marked by an increase in purchasing activity and stock levels. Employment rates also rose for the second month running.
Inflation rates jumped up for the third consecutive month, placing an elevated price pressure on the non-oil private sector, as cost and charges rose at their fastest rate in five months. With costs driven up by a fall in the exchange rate against the USD. New orders dropped, although only slightly, for the second month in a row. Delivery times jumped up in August, pushed up by growing transport costs. Firms also boosted staff wages, in response to cost-of-living pressures.
Over in Saudi Arabia: Non-oil business activity in the Kingdom continued to grow at slow but steady pace in August, with new orders, purchasing activity and employment rising despite a slightly sluggish output levels and a drop in selling prices, according to Riyad Bank Saudi Arabia PMI (pdf). The headline reading rose up to 54.8 in August, from 54.4 in July, growing upwards for the first time since February.
Selling prices dropped in effort to harness demand, as output levels rose at the lowest rates since early 2022. Firms reported difficulties expanding sales due to growing market competition, with purchasing activity and new orders remaining muted in comparison to activity over the past few years.
A slight uptick in new orders and a boost in government investment drove purchasing activity upwards, with stock purchases sharply rising. The nation’s non-oil market was buoyed by growing new exports, as firms recorded a significant upturn in foreign sales. In turn, input cost pressures softened to their lowest rate in just over a year, supported by a slower rise in overall purchase costs.
Employment rates grew at one of the fastest rates in a decade, as firms look to boost output and streamline operations. Signaling that “national businesses are increasingly confident in their expansion plans,” with employment growth “being a key driver of momentum in August,” Riyad Bank Chief Economist Naif Al-Ghaith said in the report. Subsequently, backlog rates fell at the swiftest pace in over four years.
Upbeat sentiment in Egypt + KSA: Egypt’s PMI signals that “business conditions are on the mend,” Owen says, with improving market conditions driving up market confidence to their highest level in over two years. However, growing price pressures pose a risk, as they harbor the potential to “limit spending and weaken market recovery,” Owen stresses. Over in Saudi Arabia, non-oil firms were more optimistic about future activity, with forecasts for the year ahead boosted to their strongest in nearly six months.
