Saudi non-oil private sector expansion quickens as recovery deepens – PMI

FILE PHOTO: Cars drive past the King Abdullah Financial District in Riyadh
FILE PHOTO: Cars drive past the King Abdullah Financial District in Riyadh, Saudi Arabia, November 12, 2017. REUTERS/Faisal Al Nasser

June 3, 2021

DUBAI (Reuters) – Saudi Arabia’s non-oil private sector expanded for the ninth consecutive month in May and did so at a pace that quickened for a second straight month, a survey showed on Thursday, further solidifying its recovery from the pandemic and last year’s historic slide in oil prices.

The seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers’ Index (PMI) rose to 56.4 in May from 55.2 in April, its fastest pace of growth since January. It signalled a robust improvement in business conditions and approached the series average of 56.9.

Saudi Arabia’s economy, the largest in the Arab world, is expected to grow 2.1% in 2021 after shrinking 4.1% last year amid the twin shocks of the coronavirus pandemic and lower oil prices, the IMF said in a recent report.

The output subindex, a measure of business activity, climbed to 62.0 in May from 58.7 in April, its strongest pace since late 2017. That reading, above the series average of 61.5, indicated a rapid increase in output as firms noted rising new orders and increased marketing activities.

“Most firms continued to operate with unchanged workforce numbers, suggesting a focus on boosting productivity back to pre-COVID levels. On the plus side, inventories were increased at the quickest pace in a year-and-a-half as firms prepare for a further recovery in demand over the coming months,” said David Owen, economist at survey compiler IHS Markit.

Saudi Arabia last month eased some health safety restrictions, allowing foreign visitors to fly in without quarantining as long as they are vaccinated against COVID-19, though 20 countries remained banned.

“After falling in each of the prior four months, the Future Output Index ticked up to indicate a slight strengthening of business expectations in May. That said, the level of optimism for the next 12 months was still far below the series average,” the PMI report said.

While job creation expanded for a second consecutive month, it softened from April’s pace and was marginal. The employment subindex had shrank in 12 of 13 months prior to the renewed expansion in April.

(Reporting by Yousef Saba; Editing by Toby Chopra)