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Khatija Haque - Head of Research & Chief Economist
Published Date: 03 May 2018
The Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) recovered from April’s all-time-low to reach 53.2 in May. However, the headline index remains well below the series average, indicating a much slower rate of growth in the non-oil private sector than we have seen in the past, despite the rebound in oil prices and increased government spending. Year-to-date, the rate of growth has also been slower than in 2016 and 2017.
The rise in the headline PMI last month was largely due a rebound in new orders, which had contracted slightly in April. The new orders index rose to 54.7 in May, despite a continued decline in export orders, which fell for the fourth consecutive month. The output index was marginally higher as well in May.
The employment index eased to 50.8 in May from 51.2 in April and the lowest reading since November 2017. 98% of firms reported unchanged payrolls numbers last month. Staff costs were largely unchanged m/m. Input cost inflation slowed in May as both purchase costs and staff costs moderated. Selling prices rose modestly on average after three months of decline, indicating that some firms were passing on higher costs to buyers.
Purchasing activity increased in May, with the ‘quantity of purchases’ index rising to a four–month high. However, this index also remains well below the series average. Pre-production inventories were broadly unchanged from April. Backlogs of work declined for the second month in a row, another indicator of excess capacity in the non-oil sector.
Despite the relatively soft survey data so far this year, firms remained overwhelmingly optimistic about their prospects over the coming year next year, with the ‘future output’ index remaining above the 70-handle. New project wins and an expected upturn in economic growth were cited by respondents as reasons for optimism. We expect elevated oil prices in recent months have helped boost expectations for future growth.
Source: IHS Markit, Emirates NBD Research
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