Saudi non-oil sector expansion loses momentum in August – 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/File Photo

September 5, 2021

DUBAI (Reuters) – Saudi Arabia’s non-oil private sector continued to grow in August but lost momentum due to a sharp drop in output expansion, a business survey showed, signalling a challenging recovery from the COVID-19 pandemic.

The seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers’ Index (PMI) dropped to 54.1 in August from 55.8 in July, remaining above the 50 mark that separates growth from contraction.

The output sub-index stood at 55.4 against 59.7 in July, its weakest reading since October last year.

“The non-oil economy went slightly off the boil in August, as output growth slipped to the weakest level for ten months amid a slowdown in new business gains,” said David Owen, economist at IHS Markit.

“Whilst domestic orders remained strong and firms saw an upturn in tourist numbers, many businesses continued to find market conditions challenging amid the pandemic,” he said.

The world’s largest crude exporter was hit hard last year by the twin shock of the coronavirus and record-low oil prices, but the economy has recovered this year amid improved demand due to the easing of coronavirus-related restrictions.

New business continued to expand in August but at a slower pace, partly because of a softer increase in export sales as rising COVID-19 cases in other parts of the world weighed on the recovery in foreign demand, the survey said.

The rate of job creation was unchanged from July and remained marginal as businesses found levels of staffing sufficient to complete existing work.

“Job creation disappointed again in August, due to a further fall in backlog volumes and a subdued outlook for future activity”, said Owen.

“Whilst firms expect an improvement in domestic business conditions in the coming months, the unpredictability of the pandemic meant that downside risks remained high.”

(Reporting by Davide Barbuscia)