Business activities in Saudi Arabia’s non-oil private sector slowed in May as growth in new orders and output slowed, a new business survey revealed on Monday. However, the pace of job creation rose to the fastest pace since early 2018.
At 58.5 in May, the Purchasing Managers’ Index (PMI) fell from 59.6 in April amid lower moves in the index’s two biggest components: New orders and output. However, the index remained well above the growth threshold of 50.0 and was higher than its long-term average of 56.9.
The Riyadh Bank PMI highlighted that new order inflows to non-oil private sector firms continued to rise sharply in May, after growth accelerated to its highest in just over eight-and-a-half years in ‘April. The pace of expansion has slowed slightly, despite the reactivation of sales from foreign customers.
“While a slower oil economy and rising interest rates will create a challenging environment for some establishments, most Saudi companies are in good shape and experiencing strong business conditions,” said Naif Al- Ghaith, Chief Economist at Riyad Bank.
“May’s results show a slight pullback from April’s strong result, reinforcing the view that global economic activity is holding up well as we head into the summer months,” he added.
Activity levels also rose sharply in May, although the pace of expansion softened and was the weakest on record in 2023 so far, the survey said.
Businesses increased their purchases of inputs and key components sharply, but to the smallest extent in five months.
Employment growth was relatively strong, with the pace of job creation rising the fastest since early 2018.
“New orders grew considerably, reflecting a strong growth in demand, especially in tourism and construction activities. This led to the fastest aggregate pace of job creation since 2018, allowing businesses to work through backlogs at a faster pace this month,” Al-Ghaith said.
Higher levels of employment and activity allowed businesses to work through backlogs at a faster pace during May.
Business expectations for the next 12 months eased slightly, but still indicate optimism about future output.
“The government continues to implement large-scale diversification policies and accelerate the development of giga-projects, with the aim of boosting the private sector, the engine of job creation,” Al Ghaith added.
(Writing by Seban Scaria; Editing by Daniel Luiz)
(seban.scaria@lseg.com)
