DUBAI: The UAE and Saudi Arabia lead economic growth in the Middle East and North Africa (Mena) region with consistent improvement in job creation, demand growth and jump in economic activities, according to Crédit Agricole Private Banking.

“With a new purchasing manager’s index (PMI) record in the UAE, once again new orders and new export orders components reflected strong growth, while job creation was sustained. Similarly, there was also a new PMI record in Saudi Arabia as output expanded along with new orders”, said Dr. Paul Wetterwald, Chief Economist, Crédit Agricole Private Banking.

In the UAE, the August 2014 PMI set a new record at 58.4. Input costs rose, as well as output prices charged by companies. The report said the rise in costs could extend the upward trend witnessed in consumer price indices (CPI) to 2.3 per cent year-on-year in the UAE in July, 3.4 per cent in Dubai.

“Demand in the UAE and Saudi Arabia was reported as strengthening, both at home and abroad. Interestingly, PMI data recorded over a period of time have clearly indicated that the MENA region still have the same leaders (UAE, Saudi Arabia), and same laggards (Egypt, Lebanon) in terms of economic performance,” said Wetterwald.

In Saudi Arabia, the August headline PMI (non-oil private sector economy) of 60.7 was at its highest level since July 2011. The most recent data in the PMI series lead to an optimistic assessment relative to the growth over the first half of 2014.

Latest report from Saudi Monetary Authority (SAMA) points to pick-up in lending growth of 0.8 per cent month on month in August compared to 0.2 per cent in July. While the private sector loan growth was 0.9 per cent in August the year to date loan growth in Saudi was 9.7 per cent at the close of August, pointing to improved business activity.

In the context of the SAMA statistics on loan growth other monetary indicators, Credit Agricole estimates a second quarter nominal GDP growth in the range of 10 per cent year-over-year. Although some increases were noticed on the price front, the bank said this was true for purchase prices and for staffing costs but at the CPI level, inflation declined slightly to +2.6 per cent.

Across the region, economies of Egypt and Lebanon continue to lag. Egypt’s PMI expanded marginally in August after its July contraction. Last month witnessed output, new orders and new export orders’ expansion, but the employment component of the PMI survey contracted, while input and output prices increased.

Lebanon’s data also pointed to economic contraction. The August 2014 PMI was unable to reach the expansion zone, registering a 45.5 mark compared to 47.9 in July. Output and new orders data showed contraction, whereas purchasing costs and output prices fell. This could push the CPI lower in the coming months: for the time being inflation stand at 2.7 per cent year-on-year.

“Beyond a short-term perspective, inflation risk is biased to the upside in most MENA countries. This applies for countries with high activity levels such as Saudi Arabia and UAE, or for countries with risk of currency weakness (Egypt). On the other hand, the uncertainty of food price evolution adds to the risks of all MENA countries,” Wetterwald.