Saudi Data Points To Muted Growth In February

Dubai: February’s purchasing managers index (PMI) data signalled a muted improvement in business conditions in Saudi Arabia’s non-oil private sector, driven by further subdued output growth.

The Emirates NBD Saudi Arabia PMI stood at 53.2 in February, only marginally higher than the January reading of 53.

The index signals a modest rate of growth in the non-oil private sector last month, at a similar rate to January’s figure.

Output increased at a slightly faster pace in February, but new order growth slowed sharply, with this index at the lowest level in the history of the survey at 52.9, while foreign demand contracted.

Despite muted overall growth, sentiment towards future growth prospects reached a 46-month high.

“While the pace of expansion in Saudi Arabia’s non-oil sector was slow by historical standards in February, firms were much more upbeat about prospects for the coming year, citing new project wins and stronger growth prospects.

"However, demand remained softer than in [the fourth quarter of] 2017, prompting firms to cut selling prices last month by the most since the survey began in August 2009,” said Khatija Haque, head of Mena Research at Emirates NBD.

After falling to a record low in the preceding survey, output growth ticked up during February. That said, the rate of expansion was the second-slowest registered in the survey’s history.

New business also expanded at the slowest pace in the survey’s history in February. A reduction in demand from both domestic and foreign markets led to a softening of new business growth. Reflecting the deterioration in foreign demand, new export orders declined, with the contraction ending a six-month sequence of growth.

Selling prices across Saudi Arabia’s non-oil private sector dropped at a record rate during February. According to anecdotal evidence, companies reduced output charges to stimulate client demand. The rate of reduction was moderate overall and the first registered since September last year.

Input price inflation softened to a three-month low during February’s survey period, falling below the long-run average. That said, average cost burdens faced by Saudi Arabia’s non-oil private sector firms continued to rise at a marked pace overall. Survey data indicated that both purchase prices and staff wages contributed to inflation.