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Mon 6 Jun 2016 01:39 PM

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Saudi private sector growth rises in May as new orders soar

Emirates NBD Saudi Arabia PMI says employment growth remains deflated despite improvement in business conditions

Saudi private sector growth rises in May as new orders soar

Saudi Arabia’s non-oil private sector looked to be in good shape midway through the second quarter, as business conditions improved to the greatest extent since last November, according to a new business survey.

Data from the Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) showed that both output and new orders rose sharply in May, with the rate of expansion in the latter picking up to a five-month high.

Companies raised their input buying at a faster pace, in line with current growth and projections of future improvements in demand. However, employment increased only modestly. On the price front, cost pressures remained subdued, while charges fell for the seventh month in a row. 

The headline seasonally adjusted Emirates NBD Saudi Arabia PMI climbed to a six-month high of 54.8 in May, from 54.2 in April. That was indicative of a robust improvement in the health of Saudi Arabia’s non-oil private sector.

However, growth was still relatively muted as the latest figure remained closer to January’s record low (53.9) than the long-run series average (58.6).

Khatija Haque, head of MENA Research at Emirates NBD, said: “The rise in the Saudi PMI to the highest reading in six months is encouraging, as it shows the resilience of the non-oil economy even in the face of tighter fiscal policy. Domestic demand remains robust, even as export demand has softened.”

The survey said a sharp expansion of new business was a key positive takeaway in the latest period. The rate of increase was the most marked since the turn of the year, with panellists commenting on new project start-ups and the introduction of new products.

Higher new work led to another rise in output during May. The pace of expansion was substantial, albeit the slowest in three months. There were reports that better marketing had also contributed to growth.

Jobs growth remained modest, however. Though slightly quicker than in April, the rate of hiring was weak in the context of historical data. Meanwhile, backlogs of work increased marginally, continuing the trend recorded throughout 2016 so far.

Total cost pressures in Saudi Arabia’s non-oil private sector eased during May. In fact, the rate of inflation was the second-slowest recorded since the series began in August 2009. Data signalled relatively muted rises in both salaries and purchasing costs.

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