Demand strength augurs well for Qatar's non-oil economy; financial services remain ‘bright spot’: QFC PMI

Output and new orders grew at solid pace at the start of July 2024 as demand strengthened in Doha's non-energy economy, while finance sector remained ‘bright spot’, according to the Qatar Financial Centre (QFC).

"Qatar's non-energy private sector continued to expand at the start of the second half of 2024," according to the latest Purchasing Managers’ Index (PMI) survey data from the QFC, compiled by Standard and Poor's Global.

Output and new orders both grew at solid rates that were broadly in line with their respective long-run survey trends, while firms were increasingly confident regarding the 12-month outlook, it said, adding they also made inroads into outstanding business, with backlogs falling the most since January 2023.

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

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

The PMI registered 51.3 in July, down from June' 23-month high of 55.9 but still signalling an overall improvement in business conditions in the non-energy private sector economy. It was slightly below the long-run trend level of 52.3 (since April 2017).

Signalling demand strengthening in Qatar’s non-energy economy, it said the level of incoming new orders expanded for the 17th time in 18 months, and at a solid rate that was broadly in line with the long-run survey trend. Companies reported new orders due to strong reputations, customer trust and high-quality goods and services.

Finding that the sustained increase in new business in July resulted in another robust expansion in total activity; it said output has risen continuously for over four years except for two brief pauses in January and December last year.

Despite rising demand for goods and services, companies were able to reduce the volume of outstanding orders at the fastest rate since January 2023, due to improved productivity.

Confidence regarding the next 12 months strengthened to a 10-month high in July, it said, adding firms reported the planned opening of new locations, adoption of new technologies, investment in training and latest marketing strategies.

"Growth momentum eased at the start of the third quarter, though this correction was perhaps to be expected in the context of a surge in June when the PMI posted its second-highest level in the survey history when excluding the post-pandemic rebound and lead-up to the 2022 World Cup," said QFC Authority chief executive officer Yousuf Mohamed al-Jaida.

Demand for inputs rose in July, as purchasing activity increased for the fifth successive month. Despite this, lead times improved to the greatest extent since July 2023 as companies developed relationships with suppliers. Input stocks declined for the fifth time in 2024 so far, albeit only marginally.

Qatari financial services companies recorded further sharp expansions in total business activity and new contracts in July, albeit at softer rates than in June. The seasonally adjusted Financial Services Business Activity and New Business Indexes posted 56.2 and 57.2 respectively, above the figures for the private sector economy as a whole.

Companies also remained strongly optimistic regarding the 12-month outlook, with sentiment unchanged since June at the highest level since July 2023. Meanwhile, employment growth was maintained for the 16th successive month.

"Financial services remained a bright spot in the economy, registering further sharp growth in new business and activity," al-Jaida said.