Dubai: Has the summer slowdown in business activity started early in Saudi Arabia?
It’s a mixed situation going by Saudi Arabia’s June PMI (Purchasing Managers Index) numbers. On the one hand, new orders dropped to their weakest levels in more than 2 years. At the same time, businesses ramped up their output levels to boost sales and projects, according to data from Riyad Bank.
Also, non-oil businesses had the ‘slowest rise’ in input purchases for nearly three years as they ‘looked to temper recent surges in stockpiles’. Job creation growth also stalled compared to May data.
Businesses pushed to offering discounts to customers found this weighed on overall selling prices and were ‘opposing efforts to pass on a solid increase in input prices’.
Still in growth territory
"The growth figures for Q2 still indicate a positive outlook for non-oil GDP in Saudi Arabia, with expectations of growth exceeding 3 per cent," said Naif Al-Ghaith, Chief Economist at Riyad Bank. "The overall performance of non-oil sectors throughout the quarter continues to drive economic growth and diversification efforts in the country.
"The high output levels, stable supply chains, and moderate job creation point towards a resilient and expanding non-oil economy.”
The rise in staffing (across Saudi businesses) was only modest and milder than in May
June's PMI score
The Saudi non-oil private sector PMI dipped for a second successive month in June, to 55 from 56.4 in May. It was the lowest recorded since January 2022. A primary reason for that was the dip in new orders.
"The new orders component of the PMI fell compared to the previous month, suggesting a slight moderation in demand growth within non-oil sectors," said Al-Ghaith. "Despite this slowdown, the growth in non-oil sectors was supported by a strong increase in output levels. Employment numbers also rose, while suppliers' delivery times continued to improve."
PMI data tracks how businesses are faring on key measures such as spending plans, input costs and end product pricing, plus supply chain dynamics.
A 'softening' market
According to Riyad Bank, "While some non-oil companies reported stronger demand, new client intakes and business development spending, others signalled a softening of market conditions."
When it comes to pricing, the new PMI survey indicates a marginal rise in what customers had to pay June, as the 'need to pass on cost increases continued to be offset by discounting efforts amid strong competition'. The 'suppressed' rate of charge inflation was happening despite overall input prices rising at the fastest in 4 months. "Wages, materials and technology costs were often cited as drivers of price pressures," the report notes.
