Saudi non-oil private sector business growth at highest since December 2017
ARAB NEWS March 05, 2019 - ‘The main driver for the improvement in February was a stronger rise in new orders, despite the second consecutive decline in new export orders’
Saudi Arabia’s headline PMI rose modestly to 56.6 in February from 56.2 in January
DUBAI: Saudi Arabia’s non-oil private sector business rose to its highest level in 14 months due to a domestically-driven rise in new orders, the latest Purchasing Managers’ Index report from Emirates NBD show.
“The main driver for the improvement in February was a stronger rise in new orders, despite the second consecutive decline in new export orders. This suggests that it is domestic demand driving order growth. The output index rose slightly last month as well,” Khatija Haque, the head of Mena research at Emirates NBD, said in the report released on Tuesday Saudi Arabia’s headline PMI rose modestly to 56.6 in February from 56.2 in January, the highest reading since December 2017. A reading above 50 indicates that the non-oil economy is on expansionary mode, while a reading below 50 suggests a contraction.
“Businesses increased their stock of pre-production inventories at the fastest rate since September, likely reflecting both the rise in new orders as well as optimism for future order growth – more than half of firms surveyed expect their output to be higher in a year’s time,” the report said.
However, Haque said the February PMI reading was still below the series average of 57.6, which indicated that non-oil growth in the kingdom was still weaker than the long-run average.
This weakness could be relatable to the hesitance of private sector employers take in additional workers, with fewer than 1 percent of firms that were surveyed reporting an increase in hiring activities.
The employment index was the lowest in nearly five years in February, at 50.2.
“Some firms indicated that cost control efforts were behind the reluctance to hire, despite rising new orders. Indeed, there was very little evidence of wage growth in the private sector last month, with the staff costs component declining to 50.2,” the PMI report noted.
“Overall input costs eased for the second month in a row, providing some relief for firms’ margins as selling prices were broadly stable. Firms continued to report strong competitive pressures, eroding their pricing power,” it added.
Meanwhile, the UAE’s PMI fell to 53.4 in February from 56.3 in January, the lowest reading since October 2016, due to a slower growth in new orders last month as well as the steepest decline in private sector employment in the survey history.
The employment index fell to 47.5 in February, as nearly 9 percent of UAE businesses reported lower headcounts relative to January and just 1.5 percent who said staff count were raised.
“Some firms reported operating with the minimum level of staffing in a bid to keep costs down. Staff costs were broadly unchanged last month, again reflecting a relatively soft job market,” the UAE PMI report said.
For Egypt, the non-oil private sector fell to a 17-month low of 48.2 in February, from 48.5 the previous month.
“The index has remained stubbornly in sub-50.0, contractionary territory for six months now, and while we continue to expect an improvement in conditions over the course of 2019, Egyptian firms clearly remain under pressure,” the Emirates NBD PMI report said.
“Output also fell at the fastest rate since September 2017, with survey respondents attributing this to cash flow issues and poor weather conditions – Egypt has been troubled by sandstorms which have disrupted transport.”