Dubai: Saudi Arabia’s Purchasing Managers’ Index (PMI) declined to 53.2 in October from 55.3 in September, the lowest reading since the series began in 2009. However, the reading still indicated an expansion in the non-oil sector last month, albeit at a slower rate.
Both output and new orders rose more slowly, while jobs growth neared stagnation. The rate of expansion in purchasing activity held up slightly better, as firms acted on forecasts of stronger sales growth.
“The decline in the PMI in October was not unexpected, given the additional fiscal measures that came into effect last month including public sector wage cuts. External demand also softened further last month,” said Khatija Haque, Head of MENA Research at Emirates NBD.
Overall, the PMI survey for October suggests that growth in the non-oil sector has slowed at the start of the fourth quarter, after a relatively strong third quarter. :The data supports our decision to revise down our GDP growth forecast for Saudi Arabia to 1.4 per cent in 2016 from 1.9 per cent previously,” said Haque.
Egypt’s non-oil private sector sank further into contraction in October, with business conditions deteriorating at the strongest rate since July 2013.
Many of the issues facing companies stemmed from the weakness of the Egyptian pound relative to the US dollar. That drove costs up considerably, often making raw materials unaffordable and thus in short-supply. As a result, both output and purchasing activity fell sharply. Higher costs linked to adverse exchange rates led a number of firms to raise their charges, which contributed in turn to faster declines in both total new work and new orders from abroad.
“October’s survey highlights the increasingly difficult operating environment confronting Egyptian private sector firms. It is difficult to see the situation improving before an IMF agreement is signed, as the ongoing FX shortage and EGP weakness on the parallel market are the main factors undermining economic output at the moment,” said Jean-Paul Pigat, Senior Economist at Emirates NBD.
