How MENA coun tries’ non-oil private sector performed in September: Purchasing manager indices (PMI) tracking non-energy sectors show improvements in business activity and purchasing in Saudi Arabia and Qatar, while Egypt’s remained in contraction as its backlogs rose to a new record.

Remember: The all-important 50.0 mark is the threshold separating contraction from growth. Anything over 50 denotes expansion and anything below indicates contraction.

Non-oil private sector activity in Saudi Arabia signaled accelerated expansion in September, amid a 27% rise in output levels, new orders, on the back of a pick up in sales growth, according to Riyad Bank Saudi Arabia PMI (pdf). The PMI reading rose to 57.2 in September, up from an 11-month-low of 56.6 in August, and above its long-run average of 56.9 “The non-oil economy continues its growth despite the challenges arising from the current monetary policy conditions,” Chief Economist at Riyad Bank Naif Al Ghaith commented.

Improving market conditions was a key catalyst to rising client orders, spurring growth in purchasing and hiring, according to the survey. Purchasing activity rose sharply as firms indicated a further increase in input requirements, though at a softer pace from August, the report noted. Businesses also saw an improvement in suppliers’ delivery times, which resulted in sharp — albeit slowing — expansion in stock levels, according to the survey.

External headwinds still had an impact: There were signs that firms absorbed some rising costs as they continued to reduce prices despite increases in input costs, coming off the back of higher raw material prices and rising wages, the survey said. Non-oil exports also fell slightly, despite inputs and imports rising, potentially impacting the kingdom’s trade balance, Al Ghaith said.

Qatar’s non-energy sector in September inched down slightly from 53.9 to 53.7 in September, indicating another month of strong improvement in business conditions, albeit at a softer pace than the previous four months, according to Qatar Financial Centre’s (QFC) PMI (pdf). While output and new business continued to expand at robust rates, it was employment that was the main highlight in September, with the rate of hiring growth the best since mid-2022, QFC CEO Yousuf Mohamed Al Jaida commented. It expanded for its seventh consecutive month, while new business increased for its eight successive month in September, according to the survey.

Purchases increased further, while supply chains continued to improve as average lead times fell for the seventeenth successive month, the most in the survey’s history. Input inventories were broadly stable as companies continued to manage stock levels efficiently, and price pressures were modest, according to the survey.

Egypt suffered from low demand + high inflation: Egypt’s contraction fell to a four-month-low of 48.7, down from 49.2 last month, but still above the series average, albeit remaining below the 50.0 mark separating growth from contraction, according to S&P Global’s Egypt PMI (pdf). Depressed demand environment due to lingering high inflation weighed heavily on the PMI reading, with Egyptian non-oil companies facing “unprecedented pressure on their operating capacity in September despite sales continuing to fall,” S&P Global senior economist David Owen commented. September is now the 34th consecutive month that business activity has been in decline.

The highest level of backlogs since 2011, inflation, and a weak FX rate also pushed purchase prices higher, according to the survey.The survey reported weaker sales and decreased output levels amid difficulties in acquiring raw materials due to import challenges, resulting in a record level of unfulfilled orders.

Inventories rose for a second month running on the back of firms holding onto stocks in the month, caused by a reduction in output as purchasing activity continued to decline. Longer customs procedures also slowed down the arrivals of inputs for the first time in three months.

On a more positive note: Firms expanded their employment levels for a second month in a row and at the quickest pace in over five years, as services sectors looked to build stronger workforces, the survey said.

Outlook for Qatar + KSA was positive all round: Surveyed firms signaled Saudi’s outlook picked up sharply after falling to its weakest level since mid-2020 last month, with firms remaining hopeful that improving market conditions and rising sales will continue to support expansion. Qatar’s outlook also remained positive in September, with manufacturers and construction firms having the strongest expectations.

But that’s not the case for Egypt: Egypt’s outlook weakened from August, with firms being only mildly confident of a rise in output over the next 12 months amid price volatility and liquidity concerns.

Looking for UAE’s PMI? The survey will be out in a few hours here, and you can find our coverage in tomorrow’s issue.

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