Qatar - The latest Purchasing Managers’ Index (PMI) survey data from Qatar Financial Centre (QFC) has signalled an overall moderation in the non-oil private sector at the start of the fourth quarter (Q4).

The rate of expansion in total activity remained marked, however, as firms prepare for an influx of sales in anticipation of the FIFA World Cup. New orders eased while purchasing activity also cooled. Meanwhile, firms trimmed their headcounts to a record degree in an effort to save on costs.

Prices data signalled improving profitability with a near-record uplift in selling charges alongside only a marginal increase in input costs.

Expectations were meanwhile boosted by the fast-approaching World Cup with sentiment at a two-year high in October.

Output expands robustly

Yousuf Mohamed Al-Jaida, Chief Executive Officer, QFC Authority: "The start of the fourth quarter revealed a cooling of business conditions in Qatar's non-energy sector. While output continued to expand robustly, firms reported a further softening in new orders.

“Subsequently, businesses were keen to make efficiency gains where they could and reduced their buying activity during the month. There were also efforts to scale back headcounts which reduced at the quickest rate in the survey's history.

"Looking ahead, the FIFA World Cup begins at the end of November and will bring with it a large influx of tourist activity to Qatar. Sustained increases in output suggest businesses are geared up for a busy four weeks of trading. There are also hopes that the sporting event will have a favourable impact on the country over the next 12 months with sentiment improving to a two-year high."

Survey responses

The Qatar PMI indices are compiled from survey responses from a panel of around 450 private sector companies. The panel covers the manufacturing, construction, wholesale, retail, and services sectors, and reflects the structure of the non-energy economy according to official national accounts data.

The headline Qatar Financial Centre PMI is a composite single-figure indicator of non-energy private sector performance. It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases.

At 48.4 in October, down from 50.7 in September, the latest PMI pointed to a moderation in non-energy private sector business conditions. The latest result brought an end to 27 successive months of growth. That said the headline figure was only marginally below the 50.0 neutral value.

Central to the deterioration was a cooling of new orders which fell for the second month in a row. The slowdown was more notable than that seen in the previous survey period. In contrast, output expanded at a marked and above trend pace amid efforts to boost output ahead of the World Cup at the end of November.

Scaling back

The sustained moderation in new orders led non-energy companies in Qatar to scale back on their purchasing activity. The rate of decline was sharp, but softer than the contractions seen during the height of the pandemic.

Softer inflows of new work allowed firms in Qatar's non-energy sector to progress existing backlogs. The rate of contraction was among the sharpest in the survey's history.

Subsequently, firms cut their staffing levels at the start of the quarter thereby signalling three successive months of job shedding. The rate of decrease was sharp and the quickest in the survey's more than five-and-a-half-year history.

Overall input prices

Turning to prices, overall input prices rose for the third month running. A renewed uptick in purchase costs drove the latest increase. The rate of inflation was only marginal, however, amid a fall in staff costs.

Firms in turn raised their selling prices sharply, and at the third-quickest rate in the survey's history, behind that seen only in the previous survey period and November 2021. According to panel comments, firms hiked charges to capitalise on greater tourist activity.

Looking ahead, firms were widely upbeat about their output expectations over the year ahead. Firms were hopeful that the FIFA World Cup would have a positive impact on output growth.

QFC Qatar PMI vs. GDP

The latest PMI data on Qatar's financial services sector signalled a further marked improvement during October, with business activity now increasing in each month since July 2021. The rate of output growth was robust and much quicker than the long-run series average.

New orders rose again, as has been the case since June 2020. The rate of growth was the softest for 15 months, however.

Qatari financial service firms continued to cut their headcounts, although the rate of reduction was only slight. Firms remained optimistic that activity growth would continue over the next 12 months.

Prices data highlighted a slight decrease in input costs in October alongside a marginal reduction in selling charges.

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