Dubai: Saudi Arabia Purchasing Managers’ Index (PMI) rose to 54.8 in May from 54.2 in April, the highest reading since November 2015. Both output and new orders grew at a strong pace last month, with the sub-indices at 60.6 and 58.1 respectively.
Domestic demand has been the main driver of order growth, with respondents citing new project start-ups and the introduction of new products as contributing to new business last month. New export orders declined for the second month in a row, reflecting soft external demand. However, the decline in export orders was marginal in May.
Encouragingly, employment growth picked up slightly in May, but remains relatively modest with this subindex at just 510, below the average for the first quarter of 2016. Purchasing activity gained momentum last month, with the quantity of purchases index rising to 57.4 and the stocks of purchases (inventories) index rising to 53.2. This likely reflects both increased orders in May as well as expectations of improved future demand.
“The rise in the Saudi PMI to the highest reading in six months is encouraging, as it shows the resilience of the non-oil economy even in the face of tighter fiscal policy. Domestic demand remains robust, even as export demand has softened,” said Khatija Haque, Head of MENA Research at Emirates NBD
Saudi Arabia PMI in May is below the series average of 58.6, suggesting that while the non-oil private sector in Saudi Arabia is still expanding, the rate of growth is low by historical standards.
The downturn in Egypt’s non-oil private sector was sustained for an eighth successive month in May. Business conditions worsened to the least extent in three months, however, with rates of contraction in output, new business and employment all easing since April. Nonetheless, each of the declines remained strong relative to its long-run trend. The weakness of the Egyptian pound against the US dollar was a factor behind economic woes, and it also contributed to substantial cost pressures. Purchase prices increased at a survey-record pace, and tariffs rose sharply as a result.
“It’s definitely encouraging to see signs that the downturn has started to ease, as tentative as those indications may be. But the survey also continues to point to fundamentally weak demand conditions across the economy, which in light of the ongoing FX shortage, is likely to persist as we head into the start of FY2016/17.” Said Jean-Paul Pigat, Senior Economist at Emirates NBD
Falling output and new business again characterised the overall downturn in May. Both dropped solidly, though the respective rates of decline eased further from the recent records seen in March.
