Saudi Arabia: Non-oil PMI increases in May, but conditions continue to deteriorate
The Purchasing Managers’ Index (PMI), produced by IHS Markit, increased to 48.1 in May from 44.4 in April. Consequently, the index remained below the 50-threshold that indicates an improvement in business activity in the non-oil private sector over the previous month.
May’s result reflected slower deteriorations in output, new orders and employment compared to April. Business closures and capacity constraints kept the index below its pre-pandemic levels, that being said, some firms highlighted an abatement in containment measures, which mitigated the business activity fallout. This could suggest the non-oil private sector should be stabilizing somewhat.
On the price front, disruptions to supply chains led to a rise in input prices, while firms continued to discount to spur demand. Consequently, lower margins and weak sales volumes forced firms to cut staffing costs, with wages falling at the fastest pace in the survey’s history, which dates back to August 2009.
Tim Moore, Economics Director at IHS Markit, commented that:
“New work continued to fall at a faster pace than at any time prior to the COVID-19 pandemic, with survey respondents commenting on rapid spending cutbacks among clients in response to concerns about the economic outlook.”