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Wed 5 Aug 2020 02:38 PM

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Improving business conditions yet to translate into job gains for Saudi, UAE

IHS Markit PMI Index said Saudi Arabia, the UAE and Egypt had a stronger recovery in non-oil private sector activity in July

Improving business conditions yet to translate into job gains for Saudi, UAE

The UAE had a second straight monthly improvement in business conditions.

Another month of improving business conditions across the Arab world’s three biggest economies isn’t translating into job gains just yet.

Employment continued to fall in Saudi Arabia, the United Arab Emirates and Egypt despite a stronger pickup in non-oil private sector activity in July, according to Purchasing Managers’ Index surveys compiled by IHS Markit.

Saudi Arabia’s PMI reached a five-month high of 50, the threshold that divides expansion from contraction, a report showed on Wednesday. IHS Markit’s gauge for Egypt came the closest to the neutral mark in 12 months. The UAE had a second straight monthly improvement in business conditions.

  • Egypt’s PMI reached 49.6, up from 44.6 in June, as new business expanded and non-oil private sector output rose for the first time in a year
  • The headline reading for the UAE climbed to 50.8 last month from 50.4, a sign of “a further marginal recovery in business conditions during July amid a greater easing of lockdown restrictions”
  • The IHS Markit Saudi Arabia PMI rose to 50 from 47.7 in June

“The July PMI scoring exactly 50.0 is a clear indication that the Saudi non-oil private sector is over the worst of the disruption caused by the pandemic, but remains some way from ‘normal’ business conditions,” said Trevor Balchin, economics director at IHS Markit.

With factories returning to growth from Europe to Asia, a turnaround is also taking hold across the Middle East’s largest economies as the region emerges from the grip of the coronavirus and oil prices stabilize. But the fallout for jobs means consumer spending will remain a drag as firms still look to lower payroll costs.

UAE employment fell for the seventh month running; IHS Markit said companies reported being able to cover their increase in new work with existing workforces.

Average staff costs in Saudi Arabia declined for a survey-record seventh consecutive month; employment dropped for the fifth month in a row, although at a weaker pace than June’s record.

Egypt also saw a slower decline in employment, but it still “fell solidly” during July; IHS Markit said respondents attributed the drop mostly to companies not replacing voluntary leavers.

“Egypt still has some way to go to return to pre-Covid levels of activity and demand though, with the recent upturns only mild overall,” said David Owen, economist at IHS Markit. “Moreover, job losses remained solid in July, signalling that firms are still trying hard to survive the post-lockdown market environment.”

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