Please ensure Javascript is enabled for purposes of website accessibility

Regional PMIs: UAE and Saudi Arabia sustain robust expansions

Daniel Richards - MENA Economist
Published Date: 06 February 2023



The S&P Global PMI survey for the UAE for January was down just modestly to 54.1, from 54.2 in December. The index continues to indicate a slower pace of expansion compared with the levels seen in the middle of last year, which is in line with expectations of slower GDP growth in the non-oil sector in 2023 – we forecast non-oil GDP growth at 3.5% this year, compared with an estimated 5.6% in 2022. Nevertheless, the PMI still indicates a robust level of activity, especially when compared to the very weak or contractionary surveys seen from the major economies in recent readings. The pace of output growth was unchanged in January compared with December, although this was well above the long run average and with new orders accelerating, the pipeline for future work is strong.


Source: S&P Global, Emirates NBD Research

One of the weaker points of the survey was a sharper contraction in new export orders after they had turned negative in December for the first time in 16 months. This is likely reflective of the challenges facing the global economy, and relatedly, business optimism remained weak in January, albeit up modestly from the low seen in December. Only 9% of respondents expected stronger output in 12 months’ time and growth in purchases slowed to a six-month low.

Input prices were marginally negative for the second month running, with most firms reporting no change in purchase prices, while staff costs were unchanged. Firms noted that with headline inflation easing from the highs seen last year, wage demands had softened. With no input price pressure, firms cut their output prices more sharply with price promotions as they strove to remain competitive.

Saudi Arabia

The Riyad Bank PMI survey for Saudi Arabia indicated an acceleration in the non-oil private sector in January as the headline reading rose to 58.2, up from 56.9 the previous month. The output, new orders, and new export orders components of the survey all came in higher compared with December’s reading, with output not far off the seven-year high hit in November. Over a third of respondents saw new orders rise, with many firms citing the massive infrastructure projects underway in Saudi Arabia as helping to drive the uptick.

Saudi Arabia PMI

Source: Riyad Bank, Emirates NBD Research

Looking at prices, overall input costs rose modestly in January, though at the slowest pace since October. The bulk of this rise was driven by input costs, although the pace of these gains was softer than seen in December. Staff costs were broadly unchanged as they came in just above the neutral 50 line, and manufacturing was the only sector to report salary gains. With input costs softer, the prices firms charged to customers rose at the slowest pace since last February. In this environment, business optimism among Saudi Arabian firms is strong, rising to the highest level in two and a half years.

The strong PMI report supports our view that the non-oil sector will continue to grow robustly this year, albeit at a slightly slower pace than seen in 2022. We forecast non-oil GDP growth of 5.5% in 2023, compared with an estimated 6.0% last year. The recent flash estimate from the Saudi General Authority for Statistics put non-oil growth at 5.4% in 2022, with a 6.2% y/y expansion in Q4.


Egypt’s S&P Global PMI fell further below the neutral 50.0 line in January as the depreciation of the pound through the end of last year took its effect on the economy. The headline reading was 45.5, down from 47.2 in December with output also falling although not quite at the pace seen in November. A fifth of firms noted lower output in January compared with December. New orders fell at a sharper rate with firms citing inflationary pressures as the pound depreciated. New export orders turned negative once more following a modest expansion in December.

Price pressures were prevalent last month, with the headline input prices component accelerating at a level just shy of November’s multi-year high. Staff costs contributed to this as high CPI inflation – 21.3% in December – led to increased wage demands and drove the fastest rise since November 2020. However, purchase prices rose even faster as the weaker pound drove up the cost of raw materials in particular and over half of respondents saw a rise in their purchasing costs. With their costs accelerating, firms passed these on to customers and output prices rose at the fastest pace since February 2017.

Business optimism has deteriorated in recent months and the component fell to its third-lowest reading in the series in January with only 10% of firms expecting an increase in output over the next 12 months. Hiring activity was weak on the back of this, with the employment component negative for the second month in a row.