Dubai: Activity across Saudi Arabia’s non-oil private sector appears to have picked up momentum at the start of the second half of the year, with July’s Purchasing Managers’ Index (PMI) rising to 57.7 from the series low of 56.1
“The data suggests that the slight slowdown we have been seeing in the region’s largest economy since March is now over. Despite global oil prices remaining low, the pace of expansion in Saudi Arabia’s non-oil economy still appears robust, and coupled with rising oil output, will prove supportive to headline GDP growth in the second half,” said Jean-Paul Pigat, Senior Economist at Emirates NBD.
Both the output and new orders components rose at a faster clip relative to June, coming in at 65.1 and 63.1 respectively, compared to 62.1 and 59.8 in the previous month. According to the survey compiler Markit, panellists reported the upturn in activity was a result of higher sales volumes and new marketing initiatives that helped strengthen domestic demand. The new export orders component also improved, and hit a four- month high of 60.1.
Weak job creation
The only area of potential concern was in the employment backdrop, which appears to be signalling a gradual weakening in the pace of job creation. In July the Employment Index fell to only 51.1, marking a 14-month low, and below the series average of 53.2. To be clear, the non-oil sector is still creating jobs, but simply doing so at a reduced speed relative to what we’ve seen in recent years.
Meanwhile, total input costs faced by Saudi Arabia’s non-oil private sector firms rose further in July, continuing the trend observed throughout the survey’s six-year history. The rate of inflation accelerated to the quickest since last September, helped by increases in both purchase prices and staff costs during the month,
