Saudi non-oil business growth falls to 8-month low in June

04/07/2017 Argaam

Saudi Arabia’s non-oil sector growth fell to an eight-month low in June, with purchasing activity recording its weakest growth rate since August 2009, Emirates NBD said in a report on Tuesday. 

 

The seasonally adjusted Emirates NBD Purchasing Managers’ Index (PMI) fell from 55.3 in May to an eight-month low of 54.3 in June.

 

Average performance in the second quarter came in at 55.4, weaker than in Q1 2017 (56.7), the report said.

 

“The average PMI for H1 2017 stood at 56.0, well above the neutral 50.0 level and signalling a faster rate of non-oil private sector growth than in H1 2016,” said Khatija Haque, head of MENA research at Emirates NBD.

 

“However, faster non-oil GDP growth this year will likely be offset by contraction in the oil sector this year, following OPEC’s decision to extend output cuts through Q1 2018,” she added.

 

Output growth slipped to 59.8 from 61.4 in May, while new export orders increased after declining for two months.

 

“Employment rose at a slightly faster rate in June (51.4) but remains relatively sluggish in the context of consistently strong growth in output in recent months,” Emirates NBD said.

 

Meanwhile, stocks of purchases (pre-production inventory) rose at a slower rate in June. This was in line with weaker overall business optimism, given that only 10.4 percent of firms said they expected their output to be higher in a year’s time, compared to over 30 percent in May.

 

Weakened oil prices in June may have contributed to lower optimism, the report said.

 

Input price inflation accelerated slightly last month, with the input price index rising to 52.1.

 

However, companies did not fully pass on the higher costs to consumers, with output prices only marginally higher on average last month. Some firms cut selling prices in June, citing competitive pressures.

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