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Saudi private sector growth momentum eased in June

Saudi private sector growth momentum eased in June

RIYADH: Saudi Arabia’s non-oil private sector growth momentum weakened in June, with both new orders and output increasing at their weakest pace in eight months, while growth of buying levels softened to its weakest since data collection began, according to the latest PMI data. On the price front, cost inflation was slightly above the May record low. Subsequently, average selling prices rose. “The average PMI for the first half of 2017 stood at 56, well above the neutral 50 level and signalling a faster rate of non-oil private sector growth than in the first half of 2016. However, faster non-oil GDP growth this year will likely be offset by contraction in the oil sector this year, following Opec’s decision to extend output cuts through Q1 2018,” said Khatija Haque, head of Mena Research at Emirates NBD.

The headline PMI index fell from 55.3 in May to an eight-month low of 54.3 in June. The overall improvement in operating conditions was supported by a sharp increase in new business wins. That said, growth eased to an eight-month low. A two-month sequence of contraction in new export orders was followed by a modest expansion during June. Panellists mentioned that good quality of products and services, as well as discounts, helped them secure new work from abroad. Amid reports of strong demand conditions, firms raised output further during June. Although the slowest in eight months, the rate of growth was sharp overall. In response to greater output requirements, firms increased payroll numbers at the fastest pace since August 2016. However, the overall rate of job creation was only slight. The latest survey data indicated that business conditions in Egypt’s non-oil private sector continued to deteriorate during June, but at a modest pace that was broadly in line with the trend observed throughout the second quarter of 2017. The overall contraction was mainly driven by falls in output and new orders, although the latter recorded the joint weakest decline in the past ten months.

Growth in new export orders continued for the third month in succession amid reports of greater interest from international markets. Currency weakness led to further input price pressures, and firms raised average selling prices but at the slowest pace in 16 months. The latest index reading signalled a solid deterioration in the overall health of the private sector. However, the PMI average for the second quarter of 2017 (47.3) was the highest since the third quarter of 2016 and considerably better than those seen around the turn of 2017. The overall downturn in the non-oil private sector was led by a sharp fall in output, although the rate of contraction was only slightly below April’s nine-month low. Panellists linked the fall in business activity to weak underlying demand conditions. New orders contracted at a marked pace, but at their weakest in the past ten months.