Dubai: Growth in Saudi Arabia’s non-oil private sector was maintained at a steady rate in June, according to the latest Purchasing Managers’ Index (PMI) data from Emirates NBD.
Output and new order growth remained very strong in June, although the pace of activity and order growth in June was slightly slower than May.
“The non-oil sector in Saudi Arabia is expanding at a robust rate, despite low oil prices, government spending cuts and more recently, higher interbank lending rates. Firms appear to be increasing operating efficiency, as jobs growth remains sluggish even as activity and new orders are rising,” said Khatija Haque, Head of Mena Research at Emirates NBD.
Weak job creation continued to undermine overall growth, as did falling exports. Export orders declined for the third month in a row, but the decline was very marginal at 49.4. The PMI survey points to subdued external demand which in turn suggests that domestic demand remains the key driver of non-oil growth in Saudi Arabia.
Employment has not benefited from rising output and new orders in recent months. The employment index was just 50.9 in June, largely unchanged from May and lower than the first half of 2016 average. A similar trend is evident in the UAE PMI surveys, and suggests that firms are becoming more efficient in their operations.
Downturn in non-oil private sector
Purchasing activity remained strong in June, while inventories rose at a similar pace to May. However, the costs of purchases increased at a fastest rate in eight months, and this underpinned higher overall input price inflation in June.
The downturn in Egypt’s non-oil private sector showed few signs of abating midway through 2016. Business conditions worsened for the ninth straight month, driven by ongoing declines in output, new orders and employment. The recent Egyptair incident was reported to have depressed tourism, contributing to another marked reduction in new business from abroad. Panellists mentioned higher prices as a factor restricting demand. Input costs rose at a survey-record pace, while the rate of charge inflation was also sharp. Continuing the recent trend, both were linked to the weakness of the Egyptian pound against the US dollar.
“June’s survey suggests the Egyptian economy continued to slow at the end of full year 2015/16, with the tourism sector appearing particularly weak. As we start the new fiscal year in July, hopes for a stronger recovery will depend in large part on whether a solution to the ongoing foreign exchange liquidity crunch can be found in the near term,” said Jean-Paul Pigat, Senior Economist at Emirates NBD.
