Solid growth in both output and new business, alongside a return to job creation, helped improve business conditions in Qatar’s non-hydrocarbon private sector in May, according to the Qatar Financial Center (QFC).
Robust demand for Qatari-produced goods and services asserted pressure on supply chains, signalled by a rise in backlogs of work and longer supplier delivery times, said the QFC’s Qatar PMI (Purchasing Manager’s Index).
The survey, compiled for the QFC by IHS Markit, has been conducted since April 2017 and provides an early indication of the operating conditions in Qatar.
The headline seasonally adjusted QFC PMI – a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil and gas private sector – rose to 52.4 in May from 51 in April.
The figure was broadly in line with that registered in March and indicated a solid expansion that was above the series’ average. Furthermore, the improvement extended the current phase of growth which began in August last year.
Readings above 50 signal an improvement in business conditions on the previous month, while readings below it show deterioration.
“A strong pick-up in job creation highlights the current strength of operating conditions and business activity. Forward-looking orders and future output data point to solid output gains in coming months, though with elevated demand the pressure on supply chain looms large,” said Dr Haitham al-Salama, special adviser to the Minister of Finance and chief economic adviser at the QFC.
Improved output and new order growth was the main driver behind the latest finding. Whilst there were some reports of falling export demand, these were outweighed by notes of improving domestic demand, the QFC said.
Output has now risen in eight successive months, the report said, adding higher business activity corroborated with May finding of increasing purchasing activity by firms in the non-oil and gas private sector.
Partly reflecting stronger operating conditions and business confidence, firms took on additional staff in May. Moreover, job creation hit a seven-month high.
In terms of inflation, input cost pressures sharpened as a result of higher purchase prices and staff cost inflation, it said, adding staff costs rose at the fastest pace in the survey’s history.
Meanwhile, output charges fell at a marked pace. Non-hydrocarbon private sector firms frequently linked reduced selling prices to promotional activity.
The level of work outstanding at companies in Qatar increased in May, the second-fastest since the survey’s inception in April 2017. Besides, supplier delivery times lengthened at a modest rate reflecting increased demand for inputs. These findings signalled increasing supply chain pressure as a result of improving demand conditions.
Positive sentiment towards future output growth improved in the most recent survey. New project wins, capital investment and an anticipated economic upturn underpinned optimism, according to the QFC.