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Business disruptions in June shrink Saudi's non-oil private sector - PMI

Saudi Arabia's Purchasing Managers' Index fell to 47.7 in June from 48.1 in May

General view of Riyadh city, after the Saudi government eased a curfew, following the outbreak of the coronavirus disease (COVID-19), in Riyadh, Saudi Arabia, June 21 2020. Image used for illustrative purpose.

REUTERS/Ahmed Yosri
By Staff Writer, ZAWYA

Non-oil private sector firms in Saudi Arabia witnessed another reduction in business activity during June due to disruptions in operations and subdued customer demand amid COVID-19.

Saudi Arabia's Purchasing Managers' Index (PMI) fell to 47.7 in June from 48.1 in May, remaining below the 50.0 mark that separates growth from contraction, according to the seasonally adjusted IHS Markit.

Faster reductions in business activity, new work and employment were the main factors leading to a decline in the headline PMI during June.

Shrinking workloads and concerns about the near-term business outlook resulted in a further round of job cuts in June. The rate of decline in staffing numbers accelerated since May and was the fastest since the survey began in August 2009.

Tim Moore, Economics Director at IHS Markit, which compiles the survey: "June data highlighted another difficult month for Saudi Arabia's non-oil private sector economy, with cautious business and consumer spending patterns widely reported to have held back new order intakes. The headline PMI signalled a sustained deterioration in overall business conditions, although the speed of the downturn remains less steep than in March and April."


"Subdued domestic demand and a sharp drop in export sales led to additional price discounting in June. Average prices charged have now dropped for five months in a row and the resulting squeeze on margins has led to more widespread cost cutting initiatives across the private sector," Moore said.

Despite ongoing supply chain pressure and reports of greater transportation costs, latest data revealed a fractional overall decline in average purchasing prices.

Meanwhile, staff costs decreased again in June, but at a slower pace than the survey record seen during May.

Survey respondents widely commented on the need to lower overheads and improve cash flow by reducing payroll costs, IHS Markit said in its report.

Companies anticipating a reduction in business activity during the next 12 months mostly commented on rising economic uncertainty and highly subdued demand, the survey compiler said.

(Writing by Seban Scaria, editing by Daniel Luiz)



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© ZAWYA 2020