Private Sector Growth Accelates in KSA, Softens in UAE

Saudi Arabia’s non-oil private sector growth rose to an 18-month high in June, although output prices and growth fell, a monthly survey of companies showed.

The seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) rose to 57.4 in June from 57.3 in May, well above the 50-mark indicating expansion.

Saudi Arabia’s private sector was subdued last year as it felt the impact of fuel price hikes, the introduction of a 5% value-added tax and the higher cost of hiring foreign workers.

But it has rebounded this year, with the PMI averaging 56.9 points so far against last year’s average of 53.8.

“The June survey data showed little change from May’s readings, with the headline PMI only marginally higher on the back of slightly faster new work growth,” said Khatija Haque, head of MENA research at Emirates NBD.

Job creation decelerated slightly to 50.3 in June from 50.5 a month earlier.

Output prices for goods and services dropped as well, to 49.6, after a rise to 50.6 last month.

Output growth fell slightly in June, with the sub-index dropping to 61.1 from 61.4 in May, a three-month low. Growth continued, however, reflecting an increase in customer demand, according to the survey’s authors.

Meanwhile, growth in the United Arab Emirates’ non-oil private sector softened slightly in June due to a marginal increase in overall input prices.

The UAE PMI fell to 57.7 last month from 59.4 in May. Output growth fell to 66.8 from 69.4 and decline in new orders was 66.0 against 69.5. Employment, which had dropped in May, rebounded slightly to 50.2.

Haque said that growth in the UAE private sector has accelerated in the second quarter, noting that the average PMI reading for the second quarter was the highest since the second quarter of 2014.

But Haque also noted that: “While firms have reported growth in output and new orders, this has come on the back of further price discounting. As a result, there has been no real boost to hiring as businesses remain focused on keeping costs down.”

Although the reading for employment rose in June, almost all respondents saw no change to their workforce numbers during the month.