Saudi Arabia: Non-oil PMI posts weakest improvement since April 2018 in February
The Purchasing Managers’ Index (PMI), produced by IHS Markit, moderated to 52.5 in February from 54.9 in January. The print represented the lowest value in 22 months. Nevertheless, the index remained above the 50-threshold that indicates an improvement in business activity in the non-oil producing private sector over the previous month.
February’s result reflected weaker expansions in output, employment, and new orders as supply chain disruptions caused by the coronavirus outbreak weighed on business activity. New business growth, increased at the softest pace in nearly two years in February. More positively, new export orders rebounded slightly last month posting the first expansion in three months. On the price front, input costs increased notably, while firms lowered output prices to stoke demand, consequently margins were squeezed significantly in February.
Tim Moore, Economics Associate Director at IHS Markit, commented that:
“February data revealed additional challenges from international supply chain disruptions following the COVID-19 outbreak in China, with firms seeking to build up inventories and source alternative suppliers of critical components.”
Looking ahead, the non-oil private sector should slow in the first quarter as the PMI in January–February points to a steep decline in momentum, while business sentiment in February was hammered by a worsening global economic outlook and the coronavirus. Moreover, subdued oil prices since the start of the year, which have been depressed further by the COVID-outbreak, could be weighing on government revenue projections, and consequently hindering public investment in to the non-oil private sector.