Private sector business conditions continue to improve in December
PMI registers 51.8, broadly in line with strong fourth quarter trend
Qatar's non-energy private sector economy ended 2020 with another above-par rate of growth, according to the December Purchasing Managers’ Index™ (PMI™) survey data. Total business activity increased at a relatively marked pace, continuing the trend shown since the rapid expansion in July and August as the economy bounced back from the lockdown-induced downturn in the second quarter of the year. New business continued to grow at a rate above the long-run survey average, while outstanding work rose the most since July 2018 signalling rising pressure from demand on business capacity. Firms continued to boost employment and wages while input purchase prices continued to fall on average, allowing companies to hold prices charged stable.
The Qatar PMI indices are compiled from survey responses from a panel of around 400 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 PMI eased slightly from 52.5 in November to 51.8 in December, broadly in line with the fourth quarter average of 51.9 and well above the long-run trend level of 49.6. This signalled a solid end to 2020 for the non-energy private sector, with all five of the components of the PMI in positive territory.
Fastest rise in outstanding business since July 2018
Total business activity continued to expand at a relatively strong rate in December. Expansion was the strongest since Q1 2018 over the fourth quarter as a whole, excluding the post-lockdown bounce in the third quarter. New business continued to support overall growth of activity and demand was sufficiently strong to generate rising levels of incomplete work. In fact, backlog growth was the strongest since July 2018.
Growth of output and new orders sustained at end of 2020.
Sub-sector data signalled that the strongest overall improvement in business conditions over the fourth quarter as whole came from manufacturing, followed by construction, wholesale & retail and services respectively. In terms of output, manufacturing registered the strongest growth for the second month running in December, which forebodes strong non-oil export performance.
Employment in the non-energy private sector rose further in December, with notably strong recruitment in services. Firms also boosted wages and salaries at one of the fastest rates of the past two years, driven partially by capacity constraints as immigration flows were tempered by coronavirus restrictions.
The monthly PMI can be aggregated to a quarterly average to enable comparisons with official gross domestic product (GDP). Since the survey began in April 2017 the quarterly PMI has a correlation of 0.66 with the year-on-year percentage change in GDP in real terms, with a PMI reading of 50.0 equating to 0.2% growth on an annual basis. The latest official data reported a year-on-year decline of 6.1% in real terms in the second quarter of 2020, a figure heavily influenced by the lockdown measures implemented to contain the coronavirus outbreak. The PMI data for the third quarter of 2020 are consistent with a 2.7% year-on-year increase in GDP, and data for the fourth quarter are signalling a further increase of 1.0%. Year-to-date PMI data confirms Qatar’s economic trajectory is more in-line with what is observed in China and other East Asian economies with a V-shaped recovery, rather than that seen in Europe or the United States.
QFC Qatar PMI™ vs. GDP
"Qatar’s PMI remained at an elevated level in December, signalling that the non-energy private sector economy continued to expand at a relatively strong pace. Business conditions have steadily improved throughout the second half of 2020, following the sharp downturn in the second quarter as the economy locked down to successfully combat the coronavirus pandemic. Moreover, the volume of outstanding business is rising at the fastest rate in nearly two-and-a-half years, boding well for the first quarter of 2021"
Sheikha Alanoud bint Hamad Al-Thani
Managing Director of Business Development, QFC Authority