JEDDAH -- Growth of Saudi Arabia's non-oil private sector stalled in April, with business conditions improving at the slowest pace in three months.
Output continued to rise sharply, but the rate of job creation eased to near-stagnation. New business increased to the least extent in the survey's history, weighed down by a first drop in exports since data collection started in 2009. On the price front, charges nearly stabilized as rises stemming from higher input costs offset cuts generated by increased competition.
The survey, sponsored by Emirates NBD and produced by Markit, contains original data collected from a monthly survey of business conditions in the Saudi private sector.
Meanwhile, purchasing activity at Saudi Arabia's non-oil private sector businesses continued to rise, extending the current upturn which has run throughout the survey's history. The rate of growth eased, however, and was among the weakest on record. As a result, input stocks rose only modestly.
Total cost pressures remained muted in the context of historical data in April. Despite picking up slightly since March, the rate of inflation was only modest, dampened by a first drop in salaries since the series began in August 2009. Nonetheless, the rise in overall input prices reportedly had an impact on firms' charges. After five successive months of decline, tariffs broadly stabilized as higher costs offset competitive pressures.
Commenting on the Emirates NBD Saudi Arabia PMITM, Khatija Haque, Head of MENA Research at Emirates NBD, said "Saudi Arabia's PMI has been broadly stable around 54 since the start of this year, signalling steady growth in the non-oil private sector. Both new orders and output continue to rise at a robust rate, despite weaker external demand. Firms were more cautious with hiring in April, with jobs growth at a four-month low."
Key findings:
• Business conditions improve at weaker pace
• Falling exports contribute to slowdown in growth of total new work
• Sharp expansion of output, but employment barely rises
At 54.2, the headline seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers' Index (PMI) - a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy - was consistent with a solid improvement in business conditions in April. That said, the latest reading suggested that growth of the non-oil private sector as a whole remained at a relatively low ebb. It was down slightly from 54.5 in March, and only just above the survey-record low seen in January (53.9).
In line with the overall trend, growth of new orders slowed in April. The increase was the least marked in the series history, albeit still solid overall. Whereas some panelists continued to mention improving client demand and better marketing as factors behind higher new work, others suggested that they had lost out due to greater competition. Lower exports also undermined total new business - the fall in new work from abroad was a survey-first.
The relatively subdued rise in new orders barely motivated firms to add to their staffing levels in April. Employment rose only slightly, with the vast majority of respondents seeing no change since March. Backlogs of work increased further, but at the slowest pace in the current 39-month sequence of growth. Some companies said that they had become more efficient in production.
Output remained a bright spot in April. Though below the long-run average, the latest expansion was sharp and the second-strongest in five months. According to anecdotal evidence, higher activity was a result of projects that were either new or ongoing.
© The Saudi Gazette 2016
