Saudi PMI hits 2-year high on new order growth

Saudi Arabia’s headline Purchasing Managers’ Index (PMI) rose modestly to 56.6 in February from 56.2 in January, the highest reading since December 2017, according to the latest survey by Emirates NBD and IHS Markit, released on Tuesday.

However, the February PMI reading is still below the series average of 57.6, indicating that non-oil growth in the kingdom is still weaker than the long-run average, the survey added.

Also read: Saudi PMI recovers in August on higher output, orders

“The main driver for the improvement in February was a stronger rise in new orders, despite the second consecutive decline in new export orders. This suggests that it is domestic demand driving order growth. The output index rose slightly last month as well,” Khatija Haque, Head of MENA Research at Emirates NBD, noted in the survey.

The upturn in business conditions seen in February was led by a steep and accelerated increase in new business – the sharpest seen since August 2015, the survey added. Export sales were down on the month, indicating that the main impetus continued to come from the domestic market.

Despite relatively strong growth in output and new orders, employment in the private sector was broadly unchanged, with fewer than 1 percent of firms surveyed reporting increased hiring, the survey added.

The employment index was the lowest in nearly five years in February, at 50.2. Some firms indicated that cost control efforts were behind the reluctance to hire, despite rising new orders.

Overall input costs eased for the second month in a row, providing some relief for firms’ margins as selling prices were broadly stable. Firms continued to report strong competitive pressures, eroding their pricing power.