Dubai: Saudi Arabia’s non-oil private sector growth slowed last month with the headline Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) easing marginally to 54.9 in July from 55 in June.
“Although the index has rebounded over the last couple of months, year-to-date the headline PMI averaged 53.4, well below the 56.0 average for the same period last year, which indicates a much slower rate of growth in the Kingdom’s non-oil private sector so far this year,” said Khatija Haque, Head of MENA Research at Emirates NBD.
The PMI survey showed both output and new orders increased sharply last month, although at a slightly slower rate than in June. However, once again the year-to-date average for both series indicate much softer growth than for the same period in 2017.
Employment increased modestly in July, as did new export orders. There is very little evidence of wage growth in Saudi Arabia’s private sector, with the staff costs index at 50.3 in July, similar to the prior two months.
While input costs continued to rise in July, the rate of increase was slower than in July. The vast majority of firms kept selling prices unchanged last month, although the output price index was fractionally below the neutral 50 level. The backlogs of work increased sharply in July, with some firms attributing this to delays in ongoing projects.
Egypt’s PMI increased from 49.4 in June to 50.3 during July, signalling an improvement in the overall health of the non-oil private sector. Though indicating only a marginal strengthening in business conditions, the headline figure hit an eight-month high as new orders entered expansion territory.
“The positive PMI reading for the first month of the new fiscal year supports our view that real GDP growth will strengthen in 2018/19 as there is a greater recovery in the private sector, supported by gradual monetary policy normalisation, improved political stability and a rebound in the tourism sector,” said Daniel Richards, MENA Economist at Emirates NBD.
For the first time in three months, firms operating in the non-oil private sector reported greater volumes of new business amid stronger demand from both domestic and foreign sources. According to panel members, improvements in inbound tourism supported the upturn in domestic new orders, while a strong global economic environment underpinned the expansion in new exports.
On a less positive note, shortages of raw materials and higher costs weighed on business activity, causing output to contract for the third month running. Moreover, staffing levels continued to fall despite the rise in new orders. However, both output and employment fell at marginal and slower rates than in June.