Price pass-through splits the region as UAE and Saudi absorb what Egypt and Qatar can’t

Firms across the region put through their steepest price increases in more than a decade in September. Sustained demand in the UAE and Saudi Arabia — whose PMI readings both came in at 55.3 — helped customers absorb higher prices, while softer demand in Egypt and Qatar meant these price increases cost firms new business.

The pricing lines are the standout in all six surveys, with EFG Hermes’ Mohamed Abu Basha flagging in a note that rising costs and the growing willingness to pass them on was the key theme of the month. UAE firms raised output charges at the fastest rate since May 2011, among the sharpest in the survey’s history, with Dubai’s the quickest since January 2014. Selling charges in Saudi Arabia rose at the second-fastest pace in more than six years. Lebanese firms matched July for the sharpest increase since March 2023. Qatari charges rose for a sixth month at a rate that stays among the highest the survey has recorded, and Egypt’s remained far above its historical trend.

The pre-war comparatives: Firms could raise their prices because demand has recovered. Most of these economies matched February, the last month before the fighting started — UAE output, new orders in Saudi, and both output and new orders in Lebanon all grew at their fastest rates since then, while Kuwaiti business confidence reached a seven-month high. The regional aggregate is further behind, with Capital Economics putting its GDP-weighted Gulf average at 54.4 in September against 53.6 in August — still short of the pre-war level and buoyed almost entirely in September by Saudi Arabia.

The breakdown

The UAE’s PMI reading matched August’s 20-month high, with output growth at a seven-month high and new business from abroad up for a third month at its sharpest since November 2024. Input costs rose at their fastest in three months on raw materials and freight, and firms passed through more than that.

Saudi Arabia’s climb to 55.3 from 53.8 was its best since February and a sixth straight month of expansion, driven by new orders rather than output, which slowed to a five-month low. Foreign orders fell for a seventh month, leaving the recovery domestic, and Capital Economics finds Ipsos consumer confidence back at mid-2025 levels. Riyad Bank chief economist Naif Al Ghaith read the stronger hiring and purchasing as firms “building operational capacity rather than simply responding to temporary demand.” Confidence itself weakened on regional tensions.

Kuwait eased to 52.4 from 53.6 and is the one market that chose volume over margin, with discounting pulling charge inflation lower even as input costs rose at their fastest since February. Export orders rose for a second month to a seven-month high and confidence reached its strongest since February, though Capital Economics reads the headline slip as a recovery that has faltered.

Egypt is where the pass-through bit back. The PMI dropped to 47.2 from 49.6, below its 48.2 long-run average, with output and new orders both falling faster than in August. Survey respondents blamed weaker market conditions, geopolitical disruption, and the strength of inflation itself, the sequence S&P warned about a month earlier. Firms raised charges again anyway, on costs from oil, metals, electricity and transportation. The conflict and recent Houthi attacks are flagged as a key risk.

Qatar’s problem is fiscal rather than commercial. The PMI slipped to 47.3 from 47.6, a seventh month of contraction and a four-month low, with construction the steepest faller. Both EFG Hermes and Capital Economics tie the weakness to spending cuts made earlier this year after LNG export revenues collapsed, leaving the non-energy private sector short of its largest customer. Charges held among the highest levels the survey has recorded even as input inflation eased for the first time this year. Trevor Balchin, economics director at S&P Global Market Intelligence, noted firms now expect conditions to strengthen “following a resolution of the conflict in the region.”

Lebanon’s rise to 50.5 from 50.1 extended its expansion to a fourth month, with output and new orders at their fastest since February and exports still falling, leaving domestic demand to carry it. Input costs rose at their sharpest in three and a half years on fuel, food and shipping, and firms passed that on at the joint-quickest rate since March 2023. Blom Bank research analyst Jana Boumatar expects geopolitical uncertainty, weak external demand and cost pressures “to continue weighing on business confidence.”

The countries pricing most aggressively are the least confident about the year ahead. UAE optimism dipped in September to just above March’s low and Saudi expectations weakened, while Qatar, Kuwait and Lebanon all grew more hopeful on the prospect of the war ending. Where this hits next is on consumers: EFG Hermes expects consumer price inflation to pick up over the coming months as firms keep raising prices to protect margins.