New orders fuel growth in Saudi non-oil businesses

RIYADH — Growth in Saudi Arabia’s non-oil private sector accelerated in May because of a sharp increase in new orders, a survey of businesses showed on Sunday. The seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index rose to 54.8 last month from 54.2 in April. The 50-point mark separates expansion from contraction. “The rise in the Saudi PMI to the highest reading in six months is encouraging, as it shows the resilience of the non-oil economy even in the face of tighter fiscal policy," said Khatija Haque, head of regional research at Emirates NBD. “Domestic demand remains robust, even as export demand has softened." Output growth slipped down to 60.6 from 60.9, but growth in new orders rose to 58.1 from 56.2. Employment growth also rose. Output price deflation intensified in May, with prices falling for a seventh straight month. Input price inflation slowed. Other economic data in the last few months has suggested a deeper slowdown in the Saudi economy than the PMI figures. M3 money supply shrank 1.5 per cent from a year earlier in April. Meanwhile, the UAE’s non-oil private sector seems to have regained some momentum during the second quarter, with activity hitting the fastest pace in eight months during May. But, worryingly, employment gains are still bound within a narrow range. The gains were “helped by a pick-up in new business growth”, according to the findings from a survey sponsored by Emirates NBD and produced by Markit. However, the data pointed to areas of underlying fragility, as both employment and input buying rose only slightly. The expansion of the latter was the least marked since September 2011. Cost pressures intensified but remained historically subdued, while output prices fell for the seventh month running. “The improvement in the UAE PMI was mainly due to strong growth in output last month, with new business picking up as well” said Haque. “This confirms our view that the non-oil sector of the UAE is continuing to expand, albeit at a slower rate than last year.” Adjusted for seasonal influences, the headline Emirates NBD UAE Purchasing Managers’ Index (PMI) – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – posted 54.0 in May, up from 52.8 in April. This is the second-highest in six months, though below the series average (54.5). It also signaled an acceleration in growth following a slowdown in the previous month. — SG/Agencies