The growth of Saudi non-oil business activities declined in May, with new orders increasing at the “slowest pace” in 25 months.
However, overall figures indicate “strong demand” for non-oil sectors.
Details
The seasonally adjusted Saudi Riyad Bank PMI (Purchasing Managers’ Index) fell to 56.4 last month.
This is down from 57 in April, marking the “second-lowest reading” in 22 months.
A reading above 50 indicates growth in activity.
So What
The sub-index for output fell to 60.1 in May.
This is down from 61.9 in April, reaching its “lowest level” since January.
Despite this, it maintained strong growth, supported by demand and the completion of backlogged orders.
The sub-index for new orders hit its “lowest level” in just over two years at 59.5, down from 61 in April.
This was impacted by slowing market conditions and increased competition.
Some Context
Overall data still shows “strong demand” for non-oil sectors, which are a “top priority” for Saudi Arabia.
This comes as the Kingdom reduces its dependence on oil and accelerates policies aimed at boosting investment in tourism and construction.
Additionally, efforts are being made to expand the private sector.
Naif Al-Ghaith, Chief Economist at Riyad Bank, explained that rising demand has led to price pressures.
This has affected input prices and staff costs.
However, the increase in product prices was observed at a slower pace.
He also added that this balance reflects the challenges companies face in managing costs.
They are trying to benefit from the “continued expansion” of the local market.
Non-oil GDP growth is expected to exceed 3%, according to Al-Ghaith.
This is thanks to ongoing government efforts to diversify the economy of the “world’s largest crude oil exporter.”
Now What
Business confidence in May regarding the 12-month business outlook fell to its “weakest rate” since January.
