Saudi Arabia’s private-sector growth recovers in May after slump

Saudi Arabia's non-oil private sector rebounded in May after falling to its lowest level in April, Emirates NBD said in a new report.

The seasonally adjusted Purchasing Managers' Index (PMI) rose to 53.2 last month, its highest since February, from 51.4 in April.

 A level above 50 means business is expanding and below 50, contracting.

Output growth accelerated to 56.9 from 56.0 and growth of new orders to 54.7 from 49.6. However, employment growth slowed to 50.8, its lowest since last November, from 51.2.

“While the May PMI posted the highest reading this year, the index is still low by historical standards and reflects a slower rate of growth in the non-oil private sector than last year," said Khatija Haque, head of MENA Research at Emirates NBD.

"The survey data suggests that government spending and higher oil prices year-to-date are not boosting economic activity as much as they have in the past, although firms remained highly optimistic about their future prospects,” she added.  

However, output price inflation turned positive in May for the first time since January, suggesting "companies might be regaining some pricing power after being forced by VAT introduction to discount to keep market share”.

Inflows of new orders from abroad deteriorated for the fourth month in a row though the latest decline was moderate overall and the fastest for a year.

Meanwhile, employment growth slowed to 50.8, its lowest since last November, from 51.2, reaching a six-month low in May.

Despite the rate of growth so far this year having been well below the long-run trend, the “overall level of positive sentiment at non-oil private sector firms remained elevated, signaling strong optimism towards future growth prospects”, the bank stated.