Business activity kicks off the year with “modest deterioration”: Non-oil private sector activity saw another month of contraction in January as inflationary pressures dampened demand and pushed business sentiment for the next 12 months to one of the lowest on record, according to S&P Global’s purchasing managers’ index (pdf).

The numbers: The index fell to 48.1 in January from 48.5 in December, logging a three-month low and remaining below the 50 threshold that separates growth from contraction for the 38th straight month.

“The drop was partly due to a faster decline in order book volumes, which in turn are still being impacted by inflationary pressures,” S&P Senior Economist David Owen wrote. Moreover, a weak EGP and import restrictions drove production costs and output prices to accelerate at their sharpest rates in 12 months, leading to a greater share of cost burdens being passed onto customers.

Can a tourism slowdown spill over to the rest of the economy? Some companies warned that the negative impact of the ongoing war in Gaza and geopolitical tensions on the tourism sector “could lead to further headwinds for the non-oil economy over the next few months,” Owen wrote.

The story got ink in Reuters.

FROM THE REGION-

  • Saudi growth eases: Lukewarm demand and rising cost pushed Saudi Arabia’s PMI to its lowest level in two years in January to 55.4, down from 57.5 in December, according to S&P’s PMI (pdf).
  • UAE maintains strong growth: Strong output and rising new business inflows led to a “marked uplift in activity” in the UAE, albeit at a slower rate. The country’s PMI recorded 56.6 in January, down from 57.4 in December, S&P’s PMI (pdf) showed.
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