A sustained recovery was apparent in Qatar's non-oil sector in January 2021 with business activity and new business registering the sharpest jump, employment growth sustaining momentum for the fourth month and output expectations remaining positive, according to the Qatar Financial Centre (QFC).
The latest Purchasing Managers’ Index (PMI) survey data from the QFC and IHS Markit highlighted a strengthening rate of expansion in the non-energy private sector economy in January; equating to a 1.8% growth in the official gross domestic product (GDP).
The January data also indicated lower average input prices, enabling firms to reduce their selling prices slightly.
"The non-energy private sector of Qatar had a strong start to 2021, with the PMI rising sharply to 53.9...Moreover, sector data signalled broad-based improvement with services seeing a notable boost at the start of the year, having been a comparative weak spot since the pandemic struck," said Sheikha Alanoud bint Hamad al-Thani, managing director, Business Development, QFC Authority.
The Qatar PMI index are compiled from survey responses from a panel of about 400 private sector companies, which cover 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 rose from 51.8 in December to 53.9 in January, signalling the strongest overall improvement in non-energy business conditions in five months.
Moreover, the PMI was at the fourth-highest level ever registered by the survey, below the peaks seen last July (59.8) and August (57.3) when the economy rebounded rapidly from the first wave of Covid-19, and lower than that recorded in October 2017 (56.3) when domestic production boomed after inducement generated by the siege.
In comparison, since the series began in April 2017 the PMI has trended at 49.7, registering current performance well above the norm.
The sub-sector PMI readings hinted that construction was the strongest-performing area in January (55.0), followed by manufacturing (54.8), wholesale & retail (53) and services (52.9). All four indices were above their fourth quarter 2020 trends.
Highlighting that the 2.1-point rise in the headline PMI in January was generated by the two largest components: new orders and output; the QFC said "growth rates for both business activity and new business accelerated notably during the month and were among the sharpest registered since the survey began in April 2017."
Companies reported a notable pick-up in customer numbers and new projects at the start of 2021. Outstanding business rose for the fourth successive month, although the increase was only modest as capacity was expanded. Purchasing activity rose for a survey-record seventh consecutive month, but supply chains proved resilient with input delivery times even improving slightly since December.
The monthly PMI can be aggregated to a quarterly average to enable comparisons with official GDP. Since the beginning of survey in 2017, the quarterly PMI has a correlation of 0.26 with the year-on-year percentage change in GDP in real terms, with a PMI reading of 50 equating to a 0.5% fall on an annual basis.
The latest official data reported a year-on-year decline of 4.5% in real terms in the third quarter of 2020, although the economy rebounded by 5.6% from the previous quarter.
The PMI data for the fourth quarter are consistent with a broadly stable year-on-year trend in GDP at -0.1%, while January data are equivalent to growth of 1.8%.
"Although the latest GDP data (for the third quarter of last year) revealed a further contraction in the overall economy, recent PMI data suggest that the non-energy sector is now recovering strongly,” Sheikha Alanoud said.