May’s PMI data signalled a rebound in non-oil private sector growth, following the all-time low recorded in April
The findings were indicative of a moderate improvement in business conditions, with the latest expansion being the strongest registered in three months. Renewed growth of new business and stocks of purchases, alongside a robust output expansion all contributed to the upturn in May. On the price front, input price inflation eased whilst output charges rose for the first time since January.
The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the Saudi private sector.
“While the May PMI posted the highest reading this year, the index is still low by historical standards and reflects a slower rate of growth in the non-oil private sector than last year. The survey data suggests that government spending and higher oil prices year-to-date are not boosting economic activity as much as they have in the past, although firms remained highly optimistic about their future prospects,” said Khatija Haque, Head of MENA Research at Emirates NBD.
At 53.2 in May, up from 51.4 in April, the headline seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) – a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy – signalled a moderate improvement in operating conditions, and one that was the strongest in three months. That said, the rate of expansion remained well below the historical average.
Output growth at non-oil private sector companies accelerated in May. The pace of expansion was robust overall, albeit below the long-run average. Survey data suggested that an increase in new orders led to higher output requirements. Whilst some firms noted that promotional activity had resulted in higher new business, some reported scepticism towards underlying demand conditions.
Inflows of new orders from abroad deteriorated for the fourth month in a row. Furthermore, the latest decline was moderate overall and the fastest for a year.
In terms of inflation, input price pressures faced by companies eased as a result of softer purchase price and staff cost inflation. Meanwhile, higher output charges were recorded in May, thereby ending a three-month phase of price discounting.
Job creation eased to a six-month low in May. The rate of employment growth was slight overall and below the historical trend. That said, the vast majority of panel respondents reported no change in payroll numbers.
Following the first recorded contraction in stocks of purchases in April, May data signalled a return to growth. The rate of accumulation was only fractional overall, however, and was the smallest recorded expansion since the survey began in August 2009.
Despite the rate of growth so far this year having been well below the long-run trend, the overall level of positive sentiment at non-oil private sector firms remained elevated, signalling strong optimism towards future growth prospects.