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UAE and KSA PMIs down slightly but still strong in March

DUBAI, April 3, 2024

The Purchasing Managers’ Index (PMI) for UAE and Saudi Arabia dipped in March with the S&P Global for the UAE dipping to 56.9, from 57.1 in February and the Riyad Bank PMI survey for KSA at 57.0, down modestly from 57.2 in February. 
This is still a strong reading for the index, however, and there has been a marked turnaround from the comparative slowdown seen in January in UAE, says Emirates NBD Research. 
Growth in business activity slowed in March but remained robust with nearly a third of respondents noting an uptick in output. The pipeline for the coming months is positive as new orders accelerated in March, with domestic orders still driving the expansion. New export orders were also positive, but growth slowed from February, and it remained lower than the total order growth.
Robust expansion
Saudi Arabia has seen a robust expansion in the non-oil private sector, and in line with the series average. Output saw an acceleration in growth to a six-month high for the subcomponent, with the manufacturing sector in particular faring well. 
The outlook for the coming months remains strong, as new orders growth accelerated again to a three-month high even as some firms noted an increasingly competitive market. New export orders ticked up but at a slower pace than total orders, suggesting that it remains domestic orders that are driving the expansion.
Non-oil private sector growth strengthens in March. According to the first public release of the S&P Global PMI for Kuwait, non-oil private sector activity in March moved further into expansion territory, with the headline reading increasing to 53.2 from 52.7 in February. March’s figure is the sixth consecutive reading above the 50 no-change level (data was released back to October 2023), although the rate of expansion in the mid-to-low 50s is moderate overall.
The improvement in activity was driven by a further pick-up in output and new orders (though growth in new export orders decelerated slightly), aided by a promotional and advertising efforts by firms, according to the report. Business expectations of 12-month ahead output also improved. However, survey respondents noted that input costs incurred by firms were rising substantially, at the quickest pace in nearly four years, and were being passed on to consumers to improve firms’ profit margins. As such, the rate of increase in selling prices was the quickest in almost two and a half years.
PMI continues to be subdued but recovery could be in sight. The PMI rose slightly to 47.6 in March 2024 from 47.1 in February 2024 but continued to highlight overall weak economic environment. Business activity and new orders dropped further due to deteriorating purchasing power amid high inflation that had reached 36% y/y in February. March was the month of major and tough policy changes, including the large devaluation of the pound and a sharp hike in interest rates; arguably March’s PMI scores have held up relatively well in the circumstances.
Looking ahead, businesses should start getting access to FX allowing for a smoother import process and an improved production cycle – though the anticipated recovery in orders and demand could take a few months as inflation is expected to rise in the near term following the currency devaluation. Based on the PMI survey, firms remain downbeat about the next 12 months, though we expect sentiment to continue improving over the coming months.--TradeArabia News Service


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