Saudi non-oil sector growth remains robust in May

dubai - Business conditions were supported by sharp expansions in output and new orders

The Saudi Arabian non-oil private sector remained in expansion territory during May, supported by sharp expansions in output and new orders, a survey has found.

However, in both instances, rates of increase eased. On the price front, cost inflation dropped to a record low. Consequently, selling prices were lowered marginally. Meanwhile, new export orders fell for the second month in succession, reflecting intense competition in external markets.

The survey, sponsored by Emirates NBD and produced by IHS Markit, focused on business conditions in the Saudi private sector. The headline seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers' Index (PMI) edged down to 55.3 during May from 56.5 in April. Despite falling to a six-month low, the latest reading signalled a robust improvement in the health of the sector.

"The decline in Saudi Arabia's PMI in May was largely due to slower new orders growth, with export orders in particular showing weakness," said Khatija Haque, head of Mena research at Emirates NBD. "While the non-oil sector has seen stronger growth so far this year compared to 2016, the downside risks to overall GDP growth have increased with the extension of Opec's production cuts for a further nine months."

New projects
The degree of positive sentiment climbed to the highest in over a year across the Saudi Arabian non-oil private sector. This reflected new projects in the pipeline, as well as expectations of further improvements in demand.

Central to the latest improvement in business conditions was a sharp increase in output. Panellists commented on strong underlying demand and more projects. Nevertheless, the pace of growth was at a six-month low. New orders continued to expand, as has been the case since the inception of the survey in August 2009. Though easing to the weakest in seven months, the rate of growth was sharp overall. Panellists linked the improvement in market demand to greater promotional activities.

Underlying data suggested that growth in total new work was led by the domestic market as new export orders fell for the second consecutive month. Anecdotal evidence pointed to competitive pressures globally. Payroll numbers increased further in May, thereby stretching the current period of employment growth to 38 months. The rate of job creation was the strongest since August 2016, but only marginal.

Overall input price inflation in the Saudi Arabian non-oil private sector eased to a survey-record low and was marginal. As a result, some firms offered discounts. The rate of decline in charges was, however, fractional. In response to greater output requirements, firms engaged in further input buying. In spite of easing to a 13-month low, the rate of growth was sharp overall. Subsequently, stocks of purchases continued to increase.

- business@khaleejtimes.com