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Fri 8 Mar 2019 01:22 AM

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Saudi private sector employment growth falls to 5-year low

Employment in Saudi Arabia's private sector is subdued in February despite economic growth hitting highest mark since December 2017

Saudi private sector employment growth falls to 5-year low
The employment index was the lowest in nearly five years in February, at 50.2.

The growth of Saudi Arabia's non-oil private sector rose to its highest level for more than a year in February but employment levels were near a five-year low, according to a new survey.

Data from the Emirates NBD Purchasing Managers’ Index (PMI) for Saudi Arabia showed that the main driver for the improvement in February was a stronger rise in new orders, despite the second consecutive decline in new export orders.

This suggests that it is domestic demand driving order growth while the output index rose slightly last month as well.

Khatija Haque, head of MENA Research at Emirates NBD, said the PMI rose modestly to 56.6 in February from 56.2 in January, the highest reading since December 2017.

However, the February PMI reading is still below the series average of 57.6, indicating that non-oil growth in the kingdom is still weaker than the long-run average.

He added that despite relatively strong growth in output and new orders, employment in the private sector was broadly unchanged, with fewer than 1 percent of firms surveyed reporting increased hiring.

The employment index was the lowest in nearly five years in February, at 50.2. Some firms indicated that cost control efforts were behind the reluctance to hire, despite rising new orders. There was also very little evidence of wage growth in the private sector last month, with the staff costs component declining to 50.2.

According to the survey, overall input costs eased for the second month in a row, providing some relief for firms’ margins as selling prices were broadly stable. Firms continued to report strong competitive pressures, eroding their pricing power.

"Businesses increased their stock of pre-production inventories at the fastest rate since September, likely reflecting both the rise in new orders as well as optimism for future order growth – more than half of firms surveyed expect their output to be higher in a year’s time,” added Haque.

Firms’ overall operating expenses were little-changed in February, as a slight rise in average staff pay was offset by a similarly marginal fall in purchasing costs.

Average prices charged for goods and services were also broadly stable. A decrease in selling prices has been recorded in each month since last November; however, in February fewer firms reported offering discounts amid stronger underlying demand.