PHOTO
While Saudi Arabia’s non-oil economy expanded in August, output grew at the weakest pace in ten months and new orders rose to a lesser extent amid a softer recovery in export demand, the latest survey of purchasing managers showed on Sunday.
The seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers’ Index (PMI) fell to 54.1 in August from 55.8 in July; the slowest in five months.
Businesses continued to report high levels of excess capacity and a subdued outlook for future output. “As a result, employment growth remained negligible while stocks of purchases increased at the slowest pace since last October. Output charges meanwhile rose at the strongest rate for a year despite only a modest uptick in input costs,” the report said.
A large part of the 1.7-point fall in the PMI was driven by the Output Index, which dropped sharply to its lowest level since October 2020. Despite that there was a rise in non-oil activity, which the survey panellists attributed to demand improvements and the easing of travel measures.
"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. Whilst domestic orders remained strong and firms saw an upturn in tourist numbers, many businesses continued to find market conditions challenging amid the pandemic. That said, demand momentum is still largely on the upside, with nearly three times as many firms seeing a rise in new orders as those registering a fall,” said David Owen, economist at IHS Markit.
Job creation remained sluggish in August, with companies indicating that current output capacity was 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. Whilst firms expect an improvement in domestic business conditions in the coming months, the unpredictability of the pandemic meant that downside risks remained high" said Owen.
Weak hiring was also linked to a subdued level of business confidence in August. With only 11 percent of survey respondents expecting output to increase over the forthcoming year, the degree of optimism was among the lowest seen in the series history, despite improving slightly from July, the report said.
(Reporting by Brinda Darasha; editing by Seban Scaria)
Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.
© ZAWYA 2021
