The non-oil private sector continued to lose growth impetus, as indicated by the slowest improvement in business conditions in the survey’s near nine-year history, according to data by the Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI).
A contraction in new orders combined with easing job creation and softer output growth all contributed to the slowdown recorded in April. Furthermore, on the price front, input costs increased at a solid pace, whilst output charges fell for the third month running. Nonetheless, respondents remained confident towards the year ahead, with many noting that they expect the current slowdown to be temporary.
The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the Saudi private sector.
“The further softening of the non-oil activity data in April is surprising given the sharply higher oil prices so far this year, as well as the expansionary budget that was announced for 2018. Firms have cited subdued domestic demand as a reason for the decline in new orders last month, although export orders declined as well,” said Khatija Haque, Head of MENA Research at Emirates NBD.
At 51.4 in April, down from 52.8 in March, the headline seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI), a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy, slumped to a record low. That said, the figure remained above the crucial 50.0 mark that separates growth from contraction and signalled a modest overall expansion in the sector since March.
Output growth eased in the latest survey period, with the rate of expansion registering close to the low seen at the start of 2018. That said, the latest improvement remained marked overall. According to anecdotal evidence, some firms used excess capacity to clear existing backlogs of work.
Demand for goods and services produced in Saudi Arabia deteriorated in April. In fact, the contraction was the first ever recorded since the survey’s inception in August 2009. Companies blamed the fall in order books on competitive pressures alongside subdued market demand. Furthermore, foreign sales decreased for the third month running, albeit at only a marginal rate.
Quantities of purchases grew at the slowest rate on record during April. According to anecdotal evidence, firms reined in input buying in response to falling demand. Reflecting a slowdown in purchasing activity growth and marked output expansion, firms utilised existing stockpiles of goods. The deterioration in input stocks was the first in the survey history.
Continuing the sequence seen over the past four years, employment growth was registered in the non-oil private sector. Many firms noted that they hired additional local staff in response to the Saudization government policy. That said, the rate of job creation was only slight overall, and below its historical average.
Output charges decreased for the third month running. Some firms noted that they offered discounts in attempts to stimulate client demand. Concurrently, average cost burdens faced by non-oil private sector firms increased at a solid rate, albeit one that was below its historical average.