The most recent PMI™ survey of Qatari non-hydrocarbon private sector businesses highlighted a further rise in the volume of new business at the beginning of 2019's second quarter. Meanwhile, overall sentiment regarding future output was the third-strongest since the survey began in April 2017, with more than three-quarters of respondents expecting growth at their business units over the next 12 months. As a consequence, while the level of the headline PMI figure ebbed slightly from March's reading, sustained growth in such new work orders supported firms' robust expectations for future total business activity.

The headline Purchasing Managers' Index™ (PMI) for Qatar eased slightly to 48.9 in April, from 50.1 in March. Although the most recent reading continues to register above its average over the final quarter of 2018 (48.6), it is just below the trend observed over the first quarter of 2019 (49.7). The month-on-month dip in the PMI mainly reflects the slower growth rate of new orders and declines in the output as well as employment indicators.

Comment

• "The headline PMI edged lower in April but remains indicative of overall growth in the Qatari economy, and at a faster rate than the mediocre performance seen at the end of 2018.
• "Although the PMI does not directly monitor the energy sector, it correlates strongly with total quarterly gross domestic product (GDP) since the survey began in April 2017, and accurately signalled the weak growth in GDP during Q4 of just 0.3% on an annual basis."
• "The PMI subsequently improved to 49.7 over the first quarter, which is pointing to a faster annual increase in GDP at the start of 2019. This points to further sustained expansion of the non-oil economy over the coming year."
  
  
  

  Sheikha Alanoud bint Hamad Al-Thani

  Managing Director, Business Development
  Qatar Financial Centre

Small monthly changes to PMI readings are more accurately explained by short-term market volatility than substantial adjustments to growth trends. When inferring possible changes to economic projections, readers should consider the relatively short duration for which both PMI and official gross domestic product (GDP) data are available for comparison, which is currently seven quarters up to the final quarter of 2018. Over this period the PMI has a correlation of 0.88 with the annual rate of change in quarterly GDP. The official growth rate of GDP slowed to 0.3% year-on-year in real terms in Q4 2018, a trend signaled in advance by the PMI. The average PMI reading for Q1 2019 of 49.7 is broadly consistent with total GDP rising by 0.9% in real terms on an annual basis, representing a pick-up in growth at the start of the year. Moreover, the April PMI is consistent with annual GDP growth being maintained at the start of Q2.

With new orders rising at a more balanced pace than in March, firms were able to resume backlog clearance with almost one-third of respondents reporting lower backlogs. Simultaneously, the volume of inputs ordered grew, mainly reflecting the manufacturing sector, while input inventories remained broadly stable.

Overall cost pressures faced by Qatari non-energy private sector firms eased in April. The rate of input price inflation slowed from March's 12-month high. This mainly reflected lower staff costs during the month, while raw material prices rose at a slightly weaker rate than in March.

Although input costs continued to rise, firms cut their own prices for goods and services for the fifteenth month running in April. The rate of discounting was in line with those seen throughout the first quarter of 2019.