Breaking down non-oil private sector performance in KSA, UAE, and Egypt: Purchasing Manager Indices (PMIs) tracking non-energy sectors highlighted varying results in the three countries in September, with Saudi Arabia and the UAE posting further expansions, while Egypt extended its contraction.

REMEMBER- The all-important 50.0 mark is the threshold separating contraction from growth. Anything above 50 denotes expansion, while anything below indicates contraction.

SAUDI ARABIA-

Non-oil business activity in Saudi Arabia accelerated to a six-month high in September, powered by elevated output and demand, according to the Riyadh Bank Saudi Arabia PMI (pdf). The seasonally adjusted figure rose to 57.8 in September, up from 56.4 in August. This reading, which is well above the 50.0 mark, signals a robust expansion, yet it remains well below January’s peak of 60.5.

New orders accelerated at a faster pace in September, as robust market conditions, new clients, elevated marketing, and supportive pricing boosted domestic sales and helped lift new work from international customers. New order sub-index surged to 63.3 in September, from 60.1 a month earlier, according to Reuters. Firms attributed the uptick to “successful advertising campaigns and stronger demand from the GCC region,” Riyad Bank Chief Economist Naif Al Ghaith wrote in the report.

The output sub-index edged up at the fastest rate since February, recording its largest one-month gain in four years — 27% of the survey participants reported an expansion, while only 1% posted a decrease. “Overall, September’s survey highlights a resilient private sector that is navigating cost pressures while benefiting from firm demand and steady hiring,” Al Ghaith wrote.

Purchasing activity picked up to a three-month high, resulting in the biggest expansion in inventory levels since May, according to the report. Firms actively built stocks to ensure smooth distribution and prepare for upcoming projects, the report read.

Employment maintained robust momentum as firms significantly raised their hiring to handle elevated workloads and enhance sales teams. Although hiring growth saw a slight monthly dip, it remained historically sharp, helping to contain work backlogs.

Persistent cost pressures pushed selling prices up: Input cost inflation remained elevated in September, driven by increasing wages and broader inflation. Selling prices also went up, but at a moderate rate, hitting a four-month low, as some firms eased their prices to sustain their competitiveness.

Business sentiment improved for the second month in a row, as firms pointed to increased demand and ongoing projects as key drivers of their positive outlook.

UAE-

The UAE's non-oil private sector posted its highest expansion in seven months, marking a solid improvement in activity, boosted by new business intakes. The country’s seasonally adjusted S&P Global PMI (pdf) rose to 54.2 in September, up from 53.3 a month earlier. September’s reading also lands just below the survey long-run average, suggesting a good recovery from July’s 49-month plunge.

New orders accelerated at their highest level since February, as demand recorded a strong rebound from August’s four-year low, lifted by better demand conditions, elevated client engagement, and new projects. The sub-index for new orders surged to 57.2 in September, up from 53.1 a month earlier, according to Reuters.

More than 30% of surveyed firms recorded a surge in new orders, which triggered “a sharp improvement in sales growth from [the sub-index’s] four-year low in August,” S&P Global Senior Economist David Owen wrote in the report.

Output maintained a robust momentum, backed by elevated order intakes. Businesses attributed the strong activity to “strong demand, ongoing projects, marketing activities, and supportive government policy,” according to the report.

Businesses raised their purchasing activity in September, after cutting it for the first time in over four years in August. Still, this was muted by firm concerns about competition and price pressures. “Competitive pressures were again noted as a key issue, with several panelists linking this to caution around purchasing and pricing decisions,” Owed said.

Input costs rose significantly for September, mirroring a broader trend throughout the third quarter. This increase was driven by higher purchase prices, although the impact was somewhat mitigated by an easing of salary inflation.

In turn, output inflation rose at softer rates as businesses were reluctant to increase their selling prices amid competition concerns.

Employment inched up at the fastest pace since May, albeit modestly, helping backlog growth to be less sharp during September. “Companies continued to accumulate work-in-hand at a solid pace, but the uplift was the second-weakest in 20 months,” the report read.

Business sentiment remains positive: Non-oil firms' outlook for the year ahead remained strong in September, but their optimism was marginally lower than August's 10-month high. “Around 15% of respondents held a positive view about future output, while less than 1% were downbeat about their prospects.

The bigger picture: Looking ahead, non-oil sector activity across much of the Gulf is forecast to moderate, Capital Economics’ James Swanston noted in a research note seen by EnterpriseAM last month. “Low oil prices will more than offset rising output volumes and, in turn, export receipts will be weaker this year than last,” Swanston wrote, adding that “current account and budget balances will deteriorate, prompting officials to make fiscal policy less supportive.”

MEANWHILE IN EGYPT-

Egypt’s non-oil private sector activity slipped further in September, as new orders dipped at the quickest pace in five months, according to S&P Global’s latest Purchasing Managers Index report (pdf). The country’s headline figure fell 0.4 percentage points in September to 48.8, decelerating from August’s 49.2 to a three-month low.

The country has been below the 50.0 threshold that separates growth from contraction for seven straight months, and has only pushed up into the green two times since November 2020. Despite the dip, the reading is still above the survey’s historical average of 48.2 since it began in 2011.

New orders experienced the fastest drop since April, stemming from a dip in sales because of “subdued economic conditions, rising prices, and greater wage pressures,” according to businesses surveyed. In line with falling demand, output decline accelerated for the seventh consecutive month in September, but it was moderate and softer than the series' long-run trend. Businesses also raised their selling prices for the fifth straight month to pass higher costs through to clients.

Businesses scaled back their purchasing for the seventh straight month, albeit at a moderate pace. Meanwhile, stocks of purchased items inched up for the first time since May, as some firms chose to hold more inputs in reserve.

But on the bright side, cost pressures eased to their lowest level since March, which businesses partially attributed to the EGP’s relative stability against the USD. “Although companies are struggling to gain new work amid challenging market conditions as a whole, they can take some comfort from a softening of input cost pressures, driven by the pound's strengthening against the US dollar over recent months,” S&P Global Senior Economist David Owen wrote. Firms also reported some upward pressure on wages, with total staff costs edging up to their highest level since May 2024.

Employment remained broadly unchanged during September after inching up across the two previous months, marking a stalling of hiring growth as firms became “more cautious regarding capacity expansion,” the report read.

Business sentiment continued to reach new historic lows, with overall expectations for the year ahead dipping to one of its lowest levels in the survey’s history, despite the softening input inflation.

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