Even as oil has fallen from a peak in late April, the impact of stronger crude prices may be starting to feed through to the Gulf’s energy powerhouses.
Tuesday 11, June 2019
(Bloomberg) --Business conditions in Saudi Arabia and the UAE improved the most in years, signalling that recoveries may be taking hold in the Arab world’s two biggest economies.
In May, Saudi Arabia’s Emirates NBD Purchasing Managers’ Index (PMI) rose to its highest since December 2017, a similar gauge for the UAE posted its best reading since October 2014.
The two biggest Arab economies moved further above the threshold of 50 that separates contraction from growth, reaching 59.4 in the UAE and 57.3 in Saudi Arabia.
Khatija Haque, Head of the Middle East and North Africa Research at Emirates NBD, said, that in the UAE, the improvement was partly due to external demand, particularly from Saudi Arabia and Oman.
Output and new export orders in OPEC’s third-biggest producer expanded the fastest on record.
A united front from the Organisation of Petroleum Exporting Countries (OPEC) and its allies are helping to restore some stability to oil despite deteriorating US-China trade relations and rising tension in the Middle East.
Similarly, in Saudi Arabia, growth quickened in output and new orders, with companies citing stronger underlying demand conditions, the rebound in the headline PMI this year suggests that the private sector is starting to benefit from higher oil prices and the resulting improvement in the government’s fiscal position.
Additionally, discounting probably also supported the gains in new work and output in the UAE, with selling prices falling for an eighth consecutive month. Job growth remains stagnant, however, as competition reduced margins and forced companies to look for savings elsewhere.
Less than one per cent of UAE firms surveyed in May said they increased their headcount even as more than half reported higher output, however, wages remained broadly unchanged.
“The rebound in activity this year has not yet translated into job growth or higher wages, this is likely to weigh on expat population growth and household consumption,” Haque said.