How non-oil private sectors in Saudi Arabia + Egypt + UAE performed in December: Purchasing manager indices (PMI) tracking non-energy sectors in the three countries told a mixed tale in December. As the year came to a close, Saudi Arabia and the UAE held well above the 50.0 mark threshold, buoyed by healthy customer demand, while Egypt witnessed a moderate slip in its headline PMI amid subdued demand and softened output rates.

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, Saudi Arabia: Non-oil sector growth slowed in December for the first time since August, despite a record pick-up in sales and new orders, according to the Riyad Bank Saudi Arabia PMI (pdf). The seasonally adjusted headline figure came in at 58.4 in December, coming in just slightly below November’s 17-month high of 59.0, while remaining well above the 50.0 mark that separates growth from contraction.

New orders hit full speed in December: The new orders subindex climbed to 65.5 in December up from 63.4 the previous month, with new export order growth hitting a 17-month high on the back of product innovations and solid ties with international clients. “This surge is supported by elevated domestic demand and strengthening exports, which have propelled total sales volumes to their highest levels in a year,” Riyad Bank Chief Economist Naif Al Ghaith said.

Purchasing was also up: Firms’ purchasing activity rose to a nine-month high, with companies confident that demand volumes will continue to grow. The rate of employment softened from last month, easing salary pressures.

Input costs rose sharply, driven by higher material prices, but wage inflation kept overall costs in check. Some companies slashed output prices to get ahead of competitors and offload inventory. Average lead times on inputs were shortened in December to cause the swiftest rise in input holdings since May.

Over in the UAE: The UAE’s non-oil activity rose at its fastest pace in nine months in December, buoyed by strong demand which expanded new orders and output, according to S&P Global UAE PMI (pdf). The headline figure expanded to 55.4 in December, up from 54.2 in November, indicating the third consecutive monthly increase.

New orders spiked in December: The new orders subindex grew to 59.3 in December up from 58.0 the previous month, rising at the sharpest pace recorded in nine months and driven up by robust demand. Output rates also rose, with firms attributing the combined growth to ongoing projects in progress, discounted prices and favourable weather conditions. However, new export orders growth eased, with the subindex dropping to a seven-month low.

Hiring was sluggish: Employment grew at one of its slowest rates in over two-and-a-half years, due in part to margin pressure. Consequently, backlogs persisted to build up at one of the fastest paces since 2009. “While margin constraints appear to be holding some firms back from recruiting more staff … there is certainly a need to boost resources to ensure firms capitalize on demand in the new year,” S&P Global senior economist David Owen said.

Purchasing sharply rose to a 13-month high December, as firms addressed high turnover rates in materials and key components. The rate of input price inflation eased for the fourth time in five months, increasing at the weakest pace since April. Input costs rose moderately for raw materials, shipping, food goods and tech. Firms continued to discount prices amid strong competition, causing output prices to fall for the third month running.

In Egypt, non-oil business conditions slumped in December amid contracting output and muted client demand, according to S&P Global Egypt PMI (pdf). Egypt’s headline figure fell to 48.1 in December, down from 49.2 in November. Rising price pressures, driven by a weakening exchange rate to USD, eased market conditions and forced firms to carry a larger share of their cost load.

New orders and outputs dropped at their sharpest pace in eight months. Easing private sector activity was most noticeable across the construction, wholesale and retail sectors, while the service sector remained the most stable.

Input costs spiked upwards at the fastest pace in three months, driving up material costs. “Firms were less keen to raise their own charges in the face of accelerating cost burdens, instead tightening their margins in a bid to salvage orders,” Owen said. Output costs rose at the slowest pace since last May, while firms grappled to grow sales.

Total inventories dropped for the first time in six months, as firms withdrew from their stocks to combat rising purchasing costs. Purchasing expanded, albeit this rise was concentrated to the manufacturing and services sectors.

Hiring slipped marginally dropping for the second consecutive month, with companies opting to not replace departing staff to reduce hiring costs. Wage inflation surged to a four-month high in December, with the uptick linked to cost-of-living challenges.

Sentiment remains somewhat optimistic: Easing rates of inflation growth and hopes of strengthening geopolitical conditions in 2025 led to a spike in optimism, as sentiment recovered from a near-record low last month. Egyptian firms verged on meekly positive regarding output and profit expectations for the coming year, with sentiment dragged down by concerns over exchange rate movements.

Ending 2024 on a high note: KSA firms remain confident, with expectations reaching a nine-month high in December, banking on robust sales growth to boost activity levels in the next year. In the UAE companies similarly expressed optimism towards the next year ahead, yet business outlook was slightly subdued and eased for the second consecutive month.

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