How MENA countries’ non-oil private sector performed in July: Purchasing Manager Indices (PMI) tracking non-energy sectors in the UAE, Saudi Arabia, Qatar, and Egypt in July showed overall positive signs, with a notable improvement in supply chains and lead times. The growth of non-oil private sector activity in the UAE and KSA growth dipped slightly in July, as Egypt’s contraction shows slight improvement and Qatar continues to remain strong.

Non-oil private sector activity in the UAE in July remained firmly in expansion amid a rise in output levels and new orders on the back of strong consumer demand and improving market conditions, according to S&P’s Global UAE PMI (pdf). The PMI’s reading came in at 56.0, remaining well above the 50.0 mark separating growth from contraction, and their long-run average, though falling slightly from June’s recorded PMI of 56.9, with the 3.6 point drop signaling the largest dip since 2009.

Businesses’ export orders remained stagnant in comparison to June, while sales saw a sharp upturn, but at a weaker pace due to rising competition, the report added.

Also driving growth: Smaller supplier price hikes + faster delivery times. The softening of inflation to a three-month low contributed to easing of cost pressures for suppliers,with lower commodity prices and lower freight costs helping limit price hikes, the report said. Supplier delivery times also saw an improvement, as vendors requested faster input arrivals, which led firms to increase their input purchasing and inventories, it added, while noting that the rate of buying growth was the softest in four months, according to the report.

On the downside: Backlogs of work rose at the sharpest rate since March 2020 amid demand pressure, project hold-ups and delays in shipments and customer payments.

Saudi Arabia’s PMI also dropped to 57.7, falling from May’s 58.5 to its lowest in seven months, on the back of the rising cost of capital and market repricing adjustments, which led to weak new order growth, according to Riyadh Bank Saudi Arabia’s PMI (pdf) . Nevertheless, the reading remains above the long-run trend average, and is thanks to favorable domestic economic conditions and an increase in business activity. Output levels rose but backlog depletion only saw marginal growth, the report added.

Saudi businesses reported lower inventory levels, despite inflation slowing: While survey respondents put efforts towards their business expansion plans with new projects, boosting operating capacity and input buying, some firms in KSA were more reluctant and cautious with their inventory levels, causing the slowest accumulation of pre-production stocks since April, the report said. Purchasing prices also saw an increase as a result of inflation, though the report notes it rose at the slowest pace in two years, as inflation softened to its lowest in nine months, the report writes.

Supplier performance continued to improve on the back of an improvement in delivery times helped by implementing advance payments and turning to local sourcing of suppliers, the report said.

ON THE OTHER HAND- Qatar’s non-energy sector continued to boom in July on the back of growth in new orders, output, employment, and stock purchases. The PMI reading for the month came in at 54.0, slightly up from 53.8 in June — and well above the long-run trend of 52.3, according to Qatar Financial Centre’s (QFC) PMI (pdf). The rate of output expansion accelerated at the second strongest rate of the year so far, the report said.

Supply chains continued to improve, with average supply lead times falling for the fifteenth consecutive month, marking a series record, the report said. Inventories of stock levels also only saw a marginal increase, indicating that they were well managed, it added, while backlogged work continued to fall, though at a lesser rate than 1H 2023. Upward pressure on input costs in July also remained low, enabling firms to cut their prices for the third month running, QFC CEO Yousuf Mohamed Al Jaida commented.

Contraction in Egypt’s non-oil private sector slowed to its softest pace in nearly two years, as new order and output continued to decline at a slower pace amid recovering market demand, according to S&P Global Egypt’s PMI (pdf). The country’s PMI rose to 49.2 from 49.1 in June, marking another consecutive month of improvement but remaining below the 50.0 mark that separates growth from contraction. Despite recording a contraction and a decline in the sector's health, the index yielded above its long-run average for its second month.

On the bright side: The improved conditions saw inventories and staffing levels near stabilization, with supplier lead times shortening for the first time since October 2022, according to the report. High prices continued to dampen spending as input cost inflation ticked up slightly, but selling prices rose at their weakest rate since April 2022 as companies continued to absorb inflationary costs. “If the demand recovery spreads and official inflation metrics show a softening, we could see a pick-up in sentiment soon,” Owen said.

Confident outlook for the GCC: Business expectations for the UAE were at their second-strongest this year, citing improving economic conditions, greater marketing and sales pipelines. Qatar’s outlook for the next 12 months also remained positive for the broad-based sector, with service providers being the most keen, followed by goods and producers. Meanwhile, Saudi Arabia’s businesses also remained upbeat for the next 12 months in July, though their degree of optimism was the second lowest in 2023, as firms noted concerns about rising competition and obstacles to increase demand despite a strong economic backdrop.

Contrary to the GCC countries’ mostly positive outlook for the future, Egypt’s outlook is underwhelming,with just 6% of the survey panelists expecting growth, Senior Economist at S&P Global Market Intelligence David Owen said.

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