Arab News, Wed, Mar 06, 2024 | Shaban 25, 1445
UAE’s PMI grows but Egypt’s index falls to 11-month low: S&P Global
Emirates:
The UAE’s non-oil private sector expanded in February as it delivered the
strongest output growth since June 2019, according to S&P Global’s purchasing
managers’ index report.
The analysis saw the Middle Eastern country given
a PMI standing of 57.1 – up from 56.6 in January – with increased new business,
more robust client activity, and intensified marketing and development efforts
contributing to this growth.
A PMI above 50 indicates that the sector is
expanding, while below that number suggests contraction.
Meanwhile, business activity in Egypt’s non-oil
private sector declined at the sharpest rate in just over a year, with the PMI
dropping from 48.1 in January to 47.1 in February, according to S&P Global Egypt
PMI. This marked the lowest level in 11 months and is weaker than the survey’s
long-run trend.
The drop in activity can be attributed to several
factors, including the worsening foreign exchange crisis as the sharp decline in
Suez Canal trade due to Red Sea shipping disruptions exacerbated shortages of
the US dollar and other foreign currencies.
This, in turn, led to substantial increases in
purchasing costs and contributed to the most significant lengthening of supplier
delivery times since June 2022.
“Red Sea shipping disruption has roughly halved
Suez Canal revenues so far in 2024, which February PMI survey data indicated had
a considerable impact on foreign currency inflows and inflationary pressures,”
said Senior Economist at S&P Global Market Intelligence, David Owen.
Supply chain disruptions from Red Sea shipment
issues were also a challenge to the UAE private sector, leading to input
delivery delays and a backlog of work. However, according to the report,
supplier performance remained generally positive, with prompt input distribution
when requested.
“One of the PMI’s largest components, the output
index, rose to its highest level since June 2019, pointing to a rapid expansion
of business activity ... capacity pressures were apparent, however, with
backlogs of work rising at their fastest pace in nearly four years, as Red Sea
shipping disruption fed through into transport delays,” Owen commented.
Consequently, hiring activity accelerated to
manage workloads and address backlog growth, increasing employment levels at the
fastest rate since May 2023, as reported.
While overall input costs rose in the UAE, driven
by increases in material prices and wages, firms opted for price cuts. This
strategy was aimed at retaining market share, often achieved through offering
discounts to clients, according to the report.
In contrast, Egyptian companies opted to transfer
increased purchase costs to customers, resulting in a sharp increase in selling
charges, the most significant in 13 months. Consequently, new orders experienced
the fastest decline since March 2023, particularly in domestic sales facing
mounting price pressures.
Heightened inflationary pressures, particularly in
wages, were noted as Egyptian firms raised salaries in response to the
cost-of-living crisis. Consequently, there was a decrease in hiring activity
within the non-oil private sector in the first quarter, with recent data
indicating a slight decline in workforce numbers, according to the report.