Saudi private sector growth hits six-month high in June

Saudi Arabia's non-oil private sector growth accelerated to a six-month high in June, supported by a strong recovery in new orders and output, Emirates NBD said in a new report.

The seasonally adjusted Purchasing Managers' Index (PMI) rose to 55.0 last month - registering its highest reading this year so far - from 53.2 in May. A level above 50 means business is expanding and below 50, contracting.

In April, the PMI declined to its lowest level since the inception of the survey, as private businesses were hit by the introduction of 5 percent value-added tax (VAT) and domestic fuel price hikes since the beginning of 2018.

Output growth jumped to 59.1 in June from 56.9 in May,  with the latest expansion being the strongest since December last year.  

The growth of new orders increased to 58.7 from 54.7, improving at the fastest rate in six months during June. New business was sourced from both domestic and foreign sources, with the latter returning to growth for the first time since January, the report added.

“The rise in the headline PMI to the highest level this year reflects a strong recovery in new orders (including export orders) and output. Firms had been anticipating this for several months, as reflected in the very strong ‘future output’ readings since February," said Khatija Haque, head of MENA research, Emirates NBD.

"It isn’t surprising then that the future output index declined sharply in June, with most firms now expecting their output to be relatively stable over the next twelve months,” she added.  

Employment growth rose slightly to 51.1, despite the rise in orders and output.

Meanwhile, optimism towards future growth prospects eased to a nine-month low, and was "much weaker" than seen in the previous month, Emirates NBD said.