Saudi Arabia non-oil sector growth hits 2018 high

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Time: July 03, 2018


  • Saudi Arabia’s business conditions have benefited from increased government spending as well as a recovery in oil prices
  • Increased output and new work contributed to the overall improvement in growth survey found

LONDON: Growth in Saudi Arabia’s non-oil sector has reached its highest level this year as confidence in the Kingdom starts to return, a survey found.

The Emirates NBD/IHS Markit Purchasing Managers Index (PMI) — a measure of non-oil business conditions — increased to 55 in June from 53.2 in May, marking the highest reading of 2018.

The Kingdom’s PMI reading hit an all-time low of 51.4 in April. Anything below 50 would indicate a contraction in growth.

Saudi Arabia’s business conditions have benefited from increased government spending, as well as a recovery in oil prices, according to analysts.

“Overall, the June PMI data supports our view that the non-oil sector is recovering after a slow start to the year,” said Khatija Haque, head of MENA Research at Emirates NBD.

“An expected rise in oil production following last week’s OPEC meetings should also boost activity in the manufacturing sector in H2 2018,” she added.

Jason Tuvey, senior emerging markets economist at Capital Economics, said in a note: “In Saudi Arabia, a raft of public sector bonuses has helped to offset the hit to incomes from austerity measures implemented at the start of 2018 and has supported stronger growth in consumer-facing sectors.”

Specifically, increased output and new work contributed to the overall improvement in growth, the survey found. Export orders also rose for the first time since January, though the increase is relatively slight compared to historic standards.

Saudi companies ramped up their purchasing activity last month as well, with the quantity of purchases index rising to 56 from 53 in May, marking the highest reading for 2018.

However, businesses in Saudi Arabia remain cautious, with the future output index declining sharply to 56.8 in June, with just 14 percent of businesses anticipating their output to be even higher this time next year.

This article was first published in Arab News

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