DUBAI - Saudi Arabia's non-oil private sector returned to growth in September for the first time in seven months, a survey showed on Monday, amid stronger demand after a loosening of lockdown measures imposed to stem the spread of the coronavirus.
The seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers' Index (PMI) rose to 50.7 from 48.8 in August, going above the 50 mark that separates growth from contraction for the first time since February, prior to the pandemic.
"Business activity in the Saudi Arabia non-oil private sector ticked up in September, supported by a return to sales growth as the economy started to find its footing after the COVID-19 lockdown," said David Owen, economist at IHS Markit.
"In addition, the impact of a rise in VAT notably softened, after a sharp rise in prices and a dip in sales were seen in August. Cost inflation eased to just a marginal pace."
Saudi Arabia, the world's largest oil exporter, tripled VAT in July to 15% to boost state coffers badly hit by low oil prices and crude production cuts, in a move economists said will likely slow economic recovery from the coronavirus downturn.
Business conditions had deteriorated in August, partly because of the impact of VAT on consumer spending and on input costs for businesses.
In September the rise in input costs was much weaker as the tax impact eased considerably, said the survey. Job markets, however, remained subdued, with employment decreasing for the eight consecutive month.
Saudi Arabia said last week that unemployment among Saudi citizens rose to a record-high of 15.4% in the second quarter, while the economy shrank by 7%.
The Saudi economy still has "some way to go to fully recover," said Owen.
"Output growth remains well below normal, and jobs are still falling, albeit at a slower rate. Firms will require consistent rises in sales to support a strong end to the year."
(Reporting by Davide Barbuscia; Editing by Toby Chopra) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: firstname.lastname@example.org))