Saudi private sector growth falls in May

Purchasing managers index shows slower pace of growth in new orders compared to April

Growth of business activity in Saudi Arabia's non-oil private sector fell in May from the previous month, according to a survey of more than 400 private companies.

The SABB HSBC Saudi Arabia Purchasing Managers' Index (PMI), which measures activity in the manufacturing and services sectors, stood at 57 points last month, compared to 58.5 in April.

The seasonally adjusted index remains well above the 50-point mark separating growth from contraction.

The small slip in the PMI largely emanated from a drop in the rate of new order growth in May. Latest data showed that new business rose at a slower rate, with sales from abroad increasing at a much weaker pace.

However, total new order growth remained strong and overall demand was firm and there were reports that marketing and considerable efforts by private sector sales staff had supported the latest net rise in new business.

According to the survey, companies continued to respond to growth of new work by increasing output at their units, with the latest growth the sharpest seen for three months. Not only did firms seek to deal with increased new business volumes, but also worked on existing contracts.

Despite evidence of capacity constraints at their units, Saudi Arabia's non-oil producing private sector companies were careful in increasing their headcount.

Employment was up for a second successive month (with workers recruited to deal with increased workloads), but the net rise in payroll numbers was marginal.

Survey participants signalled some optimism for growth by continuing to increase their purchasing activity. May's survey indicated the sharpest rise in input buying for six months, with companies not only buying goods to service current workloads but also to boost inventories.

Latest data also showed that stocks of purchases continued to build in May but at a slower rate.

A low increase in average input prices reduced the pressure on companies to raise their own charges in May, with companies offering a slight net discount for the first time in nine months.

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