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Fri 8 Jun 2018 12:15 AM

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Saudi private sector growth rebounds from record low

Emirates NBD Purchasing Managers' Index shows renewed growth of new business contributes to upturn in May

Saudi private sector growth rebounds from record low

Saudi Arabia's non-oil private sector growth rebounded in May following the all-time low recorded in April, according to a new business survey.

The findings in the Emirates NBD Purchasing Managers' Index were indicative of a moderate improvement in business conditions, with the latest expansion being the strongest registered in three months.

Renewed growth of new business and stocks of purchases, alongside a robust output expansion all contributed to the upturn in May. On the price front, input price inflation eased while output charges rose for the first time since January.

Khatija Haque, head of MENA Research at Emirates NBD, said: “While the May PMI posted the highest reading this year, the index is still low by historical standards and reflects a slower rate of growth in the non-oil private sector than last year. 

"The survey data suggests that government spending and higher oil prices year-to-date are not boosting economic activity as much as they have in the past, although firms remained highly optimistic about their future prospects.”  

At 53.2 in May, up from 51.4 in April, the headline seasonally adjusted PMI signalled a moderate improvement in operating conditions but the rate of expansion remained well below the historical average.

Output growth at non-oil private sector companies accelerated in May. The pace of expansion was robust overall, albeit below the long-run average. Survey data suggested that an increase in new orders led to higher output requirements. While some firms noted that promotional activity had resulted in higher new business, some reported scepticism towards underlying demand conditions.

The survey said that inflows of new orders from abroad deteriorated for the fourth month in a row. Furthermore, the latest decline was moderate overall and the fastest for a year.

In terms of inflation, input price pressures faced by companies eased as a result of softer purchase price and staff cost inflation. Meanwhile, higher output charges were recorded in May, thereby ending a three-month phase of price discounting.

The survey also showed that job creation eased to a six-month low in May. The rate of employment growth was slight overall and below the historical trend. That said, the vast majority of panel respondents reported no change in payroll numbers.

Despite the rate of growth so far this year having been well below the long-run trend, the overall level of positive sentiment at non-oil private sector firms remained elevated, signalling strong optimism towards future growth prospects.

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