Please ensure Javascript is enabled for purposes of website accessibility

PMI surveys show mounting MENA cost pressures

Khatija Haque - Head of Research & Chief Economist
Daniel Richards - MENA Economist
Published Date: 06 July 2022



The UAE’s headline PMI reading fell to 54.8 in June, down from 55.6 the previous month. This remains relatively robust, and we maintain our non-oil GDP growth forecast of 4.1% in 2022, down from 5.3% last year, but price pressures are making operating conditions for businesses more challenging.

UAE PMI and key survey components

Source: S&P Global, Emirates NBD Research

Input prices accelerated at the fastest pace in 11 years last month as reopening frictions, Chinese lockdowns, and the war in Ukraine continued to drive global prices higher. Twice as many firms noted higher costs compared with those reporting them in May, with fuel and transportation related prices the key drivers. Staff costs also accelerated, rising at the fastest pace since 2018. Some of this will have been driven by hiring, as employment rose at the fastest pace since August as firms looked to cut work backlogs, but wage increases also contributed with respondents hiking salaries in response to higher fuel and food costs.

UAE businesses continued to cut prices in June despite their mounting costs, with the strongest decline in output prices since November 2020. Firms have been discounting in order to remain competitive, and this has supported faster growth in new orders domestically – export orders expanded at the same pace as the previous month – but will have squeezed margins further. If firms start to pass on prices more meaningfully to customers, then there would be upside risk to our forecast for an average UAE CPI inflation rate of 4.3% this year.

UAE businesses remained positive in the face of mounting price pressures, with business optimism at the second-highest level in two years as they anticipate an ongoing recovery in demand from the pandemic crisis.


Saudi Arabia’s PMI rose to 57.0 in June from 55.7 in May on stronger output and new order growth.  New export orders increased at the fastest pace since November 2021 and firms increased hiring albeit only slightly.  Input costs rose at the sharpest rate in almost two years in June, despite domestic petrol prices remaining fixed at last summer’s levels. Firms cited higher raw materials and petrol prices as well as slightly higher wages. However, in contrast to the UAE, firms in Saudi Arabia raised selling prices for the 15th consecutive month in June. 

Saudi Arabia PMI and key survey components

Source: S&P Global, Emirates NBD Research

Overall, firms were more optimistic about their outlook in June than they have been in the prior 16 months, despite higher costs pressures. Historically, high oil prices have supported business optimism as they were usually accompanied by expectations of increased government spending.  While the Saudi government has announced additional subsidies to mitigate the impact of inflation on low-income households, budget spending this year has been disciplined and we do not anticipate a shift to a more expansionary fiscal policy in the near term.   


Egypt’s PMI survey has been more negatively affected by the global inflationary shock than the GCC countries, as the headline reading fell to 45.2 in June, down from 47.0 the previous month. This marked the lowest level in two years, since the peak of the pandemic crisis, and was the 19th consecutive contractionary reading for the index – it has not been in expansionary territory since November 2020. Output fell to the lowest level since May 2020, and new orders also declined, suggesting that the environment will remain difficult over the coming months.  Businesses cited a drop in demand in the face of price rises, although the construction sector did notch a modest rise in orders. New export orders declined at a slower pace than seen in May, but nevertheless marked a fifth month running below the neutral 50.0 level.

Egypt PMI and key survey components

Source: S&P Global, Emirates NBD Research

Businesses cited cost pressures as being the driving determinant of performance at present, as 45% of firms saw costs increase month-on-month, with the depreciation of the pound and the ongoing issues around global commodity price rises and supply chain issues being key drivers. Staff costs also rose, at the fastest pace since October, as employees demanded pay rises in order to offset a rise in the cost of living. Higher prices have contributed to a drop-off in purchases by firms, along with deteriorating demand, as 38% of respondents reporting lower input spending in June compared with May. Inventories fell off as a result.

In contrast to the UAE, Egyptian businesses are passing on their higher costs to consumers, with the output price index seeing the biggest ever jump compared to the previous month in June to come in near a four-year high. This will keep upwards pressure on Egypt’s CPI inflation index which rose to 13.5% y/y in May.