Saudi Arabia: Non-oil business activity growth slows slightly in March
The Purchasing Managers’ Index (PMI) sponsored by Emirates NBD and produced by IHS Markit dipped from 53.2 in February to 52.8 in March, the lowest figure since the survey began. However, the index remains above the 50-threshold that indicates expansion in business activity in the non-oil producing private sector.
March’s dip was driven by slower new business growth, likely due to the recent introduction of VAT, while foreign demand declined for the second straight month. Furthermore, the rate of job creation decreased again in March, although it remained above the average observed over the last year. On the positive side, March saw a faster expansion in output, while input cost inflation dipped to a ten-month low on lower raw material and wage inflation.
Daniel Richards, MENA economist at Emirates NBD, painted a nuanced picture of the current situation: “The fall in the pace of expansion in Saudi Arabia’s non-oil private sector to its lowest levels on record last month will prompt firms to continue price discounting in a bid to galvanise demand; output prices were below the neutral 50.0 level which delineates contraction and expansion for the second month running in March. Despite the sluggish growth at present, business optimism at 71.0 remains far above the 12-month average of 61.4.”