Emirates NBD Saudi Arabia PMI™ July 2015

2 Min | 05 July 2015

PMI drops to survey-record low, but remains in solid growth territory

Riyadh, July 5th, 2015: Growth of Saudi Arabia’s non-oil private sector eased to a survey-record low in June. Underpinning the overall slowdown was the weakest rise in new orders since the survey began in 2009, while output growth also slowed during the month. That said, the rates of expansion remained sharp overall, and resulted in another robust improvement in business conditions. Meanwhile, total input costs increased at a moderate pace, contributing to a marginal rise in output charges.

The survey, sponsored by Emirates NBD and produced by Markit, contains original data collected from a monthly survey of business conditions in the Saudi private sector.

Commenting on the Emirates NBD Saudi Arabia PMITM, Khatija Haque, Head of MENA Research at Emirates NBD, said.
"While the PMI data suggest that growth in the non-oil sector has slowed markedly in Q2 2015, it is important to note that these sectors are still growing at a robust rate, with the PMI readings well above the neutral 50-level."

Key Findings

Growth of new business eases to weakest in series history
Output continues to rise sharply
Cost pressures moderate

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 – slipped from 57.0 in May to a survey-record low of 56.1 in June. Growth of the sector as a whole has eased throughout the second quarter of 2015, mirroring the trends observed for output and new work intakes. That said, the latest reading remained indicative of a robust improvement in business conditions.

The drop in the headline index was mainly driven by a slower expansion in new orders during June. Although marked, the rate of growth eased to the weakest in the survey’s near-six year history. Data indicated that new export work also increased more slowly in the latest period. Nonetheless, panel members continued to comment on solid demand conditions both domestically and abroad.

Growth of new business was the main reason behind the latest increase in output, according to panellists. Reflective of the trend seen for new orders, the rate of expansion was the least marked since January and slower than the series average, albeit sharp overall.

Similarly, input buying at non-oil private sector companies in Saudi Arabia continued to rise steeply in June. This resulted in a further solid expansion in stocks of purchases. That said, the rates of growth were slightly weaker than their respective averages.

Saudi Arabian non-oil private sector firms also raised employment in June. However, the rate of hiring was little-changed since May and moderate overall. In contrast, backlogs of work rose at the joint-quickest pace in the series history, amid reports that new work inflows had placed additional pressure on operating capacity.

On the price front, total input costs increased again in June. That said, the rate of cost inflation slowed to the weakest in more than a year, helped by relatively muted expansions in both purchase prices and staff costs.

Higher input prices led to the second consecutive monthly rise in average tariffs during June. However, the latest increase was only slight, as competitive pressures were again reported to have weighed on selling prices.

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