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Saturday, April 20, 2024 11:51 GMT
Monthly purchasing managers’ index (PMI) data –a key barometer of the health of the overall economy –indicated that activity lost its thrust in August across the core Mena regional countries, a report said.Despite being past the nadir in economic contraction across the Mena region with phased easings in lockdown restrictions shaping the recovery, the weakening in the monthly headline scores suggests that the region is by no means out of the woods, said the Mitsubishi UFJ Financial Group (MUFG), a Japanese bank holding and financial services company, in its latest Mena Economic Weekly.The UAE’s headline reading declined back into contractionary territory (below 50), edging down from 50.8 in July to 49.4 in August. When examining the breakdown, the most salient monthly decline was in the employment component, which fell to the lowest since the series began in 2009.With the labor force dominated by expatriates who must leave the country if they are laid off, job losses pose a particularly acute risk to demand and the broader recovery. Countercyclical policy appears to be only mildly gaining traction with the private sector (or providing comfort), with the future expectations reading also declining to a series low.Saudi’s PMI also fell into contractionary levels, from 50.0 in July to 48.8in August. The tripling of the rate of VAT to 15%since 1 July was the core driver behind the softening of activity (inflation spiked to 6.1% y/y in July from 0.5% y/y in June), which has eroded disposable incomes and dampened consumer spending somewhat. This was reflected in the output and new orders components which dropped sharply.Qatar was the only Mena regional economy that in fact registered a still expansionary (above 50) level in August, albeit the headline figures fell from 59.8 in July to 57.3 in August. Aggregate data has not yet been released, but high frequency indicators show a sharp, albeit uneven rebound in activity as Covid-19 restrictions have eased.Also, monetary data suggests55% of new credit generated this year has gone to the private sector –a testament that households and corporates are receiving the bulk of funding provided to offset the oil-virus shocks.Finally, Egypt’s PMI fell from 49.6 in July to 49.4 in August –the thirteenth consecutive month in contractionary territory. Encouragingly, output and new orders both rose into expansionary territory, but employment continued to contract.Overall, the August PMI readings signal that activity plateaued. A confluence of austerity implementation, ongoing virus containment measures as well as corporate caution in executing risk-reward opportunities is hampering recoveries.