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Sat 8 Jul 2017 08:41 AM

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Saudi private sector growth slips to 8-month low in June

Data from the Emirates NBD Saudi Arabia PMI shows both new orders and output increased at weaker rates

Saudi private sector growth slips to 8-month low in June

The improvement in the health of the Saudi Arabian non-oil private sector economy was sustained in June, but growth lost momentum, according to a new business survey.

Data from the Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) showed both new orders and output increased at the weakest rates in eight months, while growth of buying levels softened to the weakest since data collection began.

Concurrently, there was a renewed increase in new export orders. On the price front, cost inflation was slightly above May’s survey-record low. Subsequently, average selling prices rose.

The headline seasonally adjusted Emirates NBD Saudi Arabia PMI fell from 55.3 in May to an eight-month low of 54.3 in June. This was consistent with a marked, but slower, improvement in business conditions.

Moreover, the average performance of Q2 2017 (55.4) was weaker than in the opening quarter (56.7).
Khatija Haque, head of MENA Research at Emirates NBD, said: “The average PMI for H1 2017 stood at 56.0, well above the neutral 50.0 level and signalling a faster rate of non-oil private sector growth than in H1 2016.

"However, faster non-oil GDP growth this year will likely be offset by contraction in the oil sector this year, following OPEC’s decision to extend output cuts through Q1 2018.”

The overall improvement in operating conditions was supported by a sharp increase in new business wins. Favourable economic conditions, strong underlying demand and more construction projects were reported by panellists to be the key factors behind the rise in inflows of new business.

That said, growth eased to an eight-month low. A two-month sequence of contraction in new export orders was followed by a modest expansion during June. Panellists mentioned that good quality of products and services, as well as discounts, helped them secure new work from abroad.

In response to greater output requirements, firms increased payroll numbers at the fastest pace since August 2016. However, the overall rate of job creation was only slight.

Firms said they remained optimistic towards the 12-month outlook for output, with panellists commenting on promotional activities and projections of further improvements in economic conditions. That said, confidence fell to an eight-month low.

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