GCC economies post strong non-oil growth

Regional PMI data for June shows the GCC economies are continuing to post strong growth in their non-oil sectors against a backdrop of higher borrowing costs, weaker global growth and lower oil prices, says a report.

 

This apparent resilience sets the GCC up well as we enter the second half of the year, even as hydrocarbon output is likely to be lower than in 2022, said the Emirates NBD research report written by Khatija Haque - Head of Research & Chief Economist.

 

UAE

The S&P Global UAE headline PMI rose to 56.9 in June from 55.5 in May and is the highest reading in four years. Both business activity and new orders increased at the fastest pace this year and appear to be driven largely by strong domestic demand. 

 

New export orders did rise in June but at a much slower pace than overall new order growth. Robust demand was likely helped by lower selling prices, as firms again cut average output prices despite modest inflation in input costs. The backlogs of work rose at the fastest pace in three months in June, even as firms increased hiring. Private sector firms were also more optimistic about their outlook over the coming year in Q2 than they were in Q1 2023.

 

The average PMI for Q2 2023 was 56.3, the strongest quarter since Q2 2019, and vindicates our recent upgrade to our 2023 non-oil growth forecast for the UAE to 5.0% from 3.5% previously.

 

Saudi Arabia

The Riyad Bank Saudi Arabia PMI rose to 59.6 in June from 58.5 in May, on the back of stronger growth in new work and business output. In contrast to the UAE, new export orders in the kingdom have accelerated sharply in recent months, with the index rising to 63.4 in June from 49.4 in May, the report noted.

 

With strong new work and activity growth, private sector firms have increased their hiring, and the employment component of the survey rose to the highest level since August 2015 last month. Purchasing activity surged in June and led to another sharp rise in inventories. Input costs rose again in June but the rate of input cost inflation is relatively modest. Firms kept selling prices largely unchanged in June. Businesses remain very optimistic about the outlook over the coming year, despite lower than expected oil prices in H1 2023, it said.

 

The report expects non-oil growth of 4.8% in Saudi Arabia this year, unchanged from 2022. Overall GDP growth is expected to be slightly negative however, following additional oil production cuts from July.

 

Qatar

The only GCC economy to show slowing momentum last month was Qatar, where the Qatar Financial Centre PMI fell to 53.8 from 55.6 in May. Both activity and new orders increased in June but at a slower pace than in May, while employment in the private sector was largely unchanged last month. Backlogs of work have declined every month since July 2022, indicating spare capacity in the non-oil sectors of the economy. Input costs rose modestly in June but firms discounted selling prices at the fastest rate since February 2022 as they sought to attract new clients and retain existing ones.

 

Egypt

Egypt’s PMI rose 49.1 in June from 47.8 in May and was the highest reading since August 2021. While still in contraction territory, the survey indicates some stabilization in the private sector last month. Output and new orders declined at the slowest rate than in over a year, and cost pressures appear to be easing as well. Business optimism remained modest however, with only 4% of panellists expecting output to be higher in a year’s time, the report said. -TradeArabia News Service

 

 

Source: https://www.tradearabia.com/news/BANK_411041.html

 

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