MENA corporates remain optimistic even as PMIs mixed for October

Despite a broadly positive reading, MENA purchasing manager’s index (PMI) remain subdued against the backdrop of a resurgence of COVID-19 infections across the globe and weaker oil prices.

Notwithstanding a confluence of austerity implementation, and ongoing virus containment measures, corporates remain optimistic in executing risk-reward opportunities, Ehsan Khoman, Head of MENA Research and Strategy at MUFG said.

"Whilst we are past the nadir in contraction across the region with easings in restrictions shaping the recovery, the PMI readings remain below pre-virus levels with labour market pressures continuing to linger. Overall, the October PMI readings signal that activity was mixed," Khoman said. 


However, employment pressures continue to trigger a surge in expatriate outflows which could undermine consumption and risk labour market shortfalls that could impede output, investment and overall real GDP growth.

The seasonally adjusted IHS Markit UAE PMI, which covers manufacturing and services, fell below the 50.0 no change mark in October, posting 49.5, down from 51.0 in September. The reading signalled that the UAE non-oil economy is struggling to maintain a robust recovery from the COVID-19 lockdown earlier in the year, IHS Markit said.

Meanwhile, business conditions in Saudi Arabia’s non-oil private sector improved further in October, but employment levels continued to fall.

"Many businesses are hopeful that growth will strengthen in the coming 12 months, but there remains a high number of firms uncertain that markets can be fully revived with COVID-19 infections still prevalent around the world,” David Owen, economist at IHS Markit said about firms in Saudi Arabia.

Egypt’s non-oil private sector economy grew to a six-year high in October.

According to IHS Markit PMI data, growth in both output and new orders strengthened leading to a renewed rise in input purchases. Nevertheless, job numbers fell for the 12th month in a row as sentiment dipped to the weakest since May.

“A PMI reading of 51.4 in October signalled that the Egyptian non-oil private sector expanded at the quickest rate in nearly six years,” said Owen.

“The relatively strong upturn will encourage businesses, but also highlights the extent of the gap between current and pre-COVID activity levels that firms still need to abridge. Growth could accelerate further if restrictions remain loose, although there are still enduring risks that may slow the recovery,” he said.




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