Saudi Arabia’s non-oil economy expanded at a slower rate in January as a surge in COVID-19 cases driven by the Omicron variant weighed on demand and new business activity.

The headline seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers’ Index (PMI) slipped to 53.2 last month from 53.9 in December and was at its lowest level for 15 months.

David Owen, economist at IHS Markit, said: "Customer demand in the non-oil sector was quelled by the Omicron variant at the start of the year, leading to slower rises in activity and new business and the softest improvement in business conditions since October 2020.”

According to survey panellists, some clients withheld orders due to uncertainty about the economic impact of the new variant, while other respondents highlighted a reduction in travel.

New orders from foreign customers fell for the first time since last March, albeit only marginally. Firms found that the surge in cases and rising prices for goods and transport had collectively driven the renewed fall.

“Export sales decreased for the first time since last March, as companies also blamed high costs for global shipping and transport,” said Owen.

Backlogs of work fell at the strongest rate for six months. With spare capacity remaining evident, staff numbers were raised only fractionally.

Input cost pressures were moderate and purchase prices rose only modestly.

Nevertheless, those surveyed were more optimistic about the coming months than they were during the year-end, underpinned by expectations that a recovery from the pandemic will lead to stronger new business growth and a stabilisation of global markets.

(Writing by Brinda Darasha; editing by Daniel Luiz)

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2022