{"id":86878,"date":"2024-06-05T00:00:00","date_gmt":"2024-06-05T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/ksa\/2024\/06\/05\/non-oil-private-sector-activity-grew-even-as-demand-momentum-slows\/"},"modified":"2024-06-05T00:00:00","modified_gmt":"2024-06-05T00:00:00","slug":"non-oil-private-sector-activity-grew-even-as-demand-momentum-slows","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/ksa\/2024\/06\/05\/non-oil-private-sector-activity-grew-even-as-demand-momentum-slows\/","title":{"rendered":"Non-oil private sector activity grew even as demand momentum slows"},"content":{"rendered":"

Non-oil business activity continued to expand in May, albeit at a <\/strong>slower pace<\/strong> as demand lost some steam, according to the Riyad Bank Saudi Arabia PMI (pdf)<\/a>. The headline figure clocked in at 56.4 last month, down from 57.0 in April<\/a>, remaining well above the 50.0 threshold that separates growth from contraction. <\/p>\n

This marks the Kingdom\u2019s second-lowest PMI reading in 22 months<\/strong> \u2014 only January\u2019s two-year low of 55.4<\/a> was worse.<\/p>\n

New orders rose at their slowest rate in just over two years: <\/strong>New orders \u2014 the biggest contributor to the headline index and typically its main driver \u2014 hit a 25-month low in May, on the back of higher competition and a slowdown in market activity. The subindex came in at 59.5, down from 61.0 in April, backed mainly by domestic sales, according to Reuters<\/a>. Firms continued to shore up their inventories as they \u201csought to prepare for strong sales performances in the future,\u201d Riyad Bank said. <\/p>\n

The sub-index for output slipped to a five-month low<\/strong>, with the second-largest component of the PMI falling to 60.1 in May from 61.9 in April. The dip indicates a slowdown but remains firmly in growth mode cushioned by healthy demand, and an uptick in employment levels as businesses look \u201cto fulfill pending workloads.\u201d<\/p>\n

What the pundits are saying: <\/strong>Saudi\u2019s PMI \u201cshows a positive trend, driven by increasing demand as evidenced by the rise in new orders. This growth has necessitated an increase in employment to meet the growing demand for goods and services,\u201d Riyad Bank Chief Economist Naif Al Ghaith says. <\/p>\n

REFRESHER- <\/strong>Non-oil growth is central to the Kingdom\u2019s diversification strategy designed to reduce its reliance on oil revenues. The World Bank<\/a> \u2014 and more recently Riyadh Bank<\/a> \u2014 expect the local non-oil economy to grow a strong 4.8% this year, up from 4.4% in 2023. Meanwhile, the government is gunning for a non-oil GDP of 4.5-5.0% in 2024<\/a>. <\/p>\n

Firms are buying less, as their stock levels pile up:<\/strong> Input purchasing growth has slowed to a 32-month low, as \u201cthe rise in inventory levels and prices has prompted firms to adjust their purchasing behaviors to align with their sales strategies,\u201d Al Ghaith said. <\/p>\n

Input costs saw \u201ca solid increase\u201d during May<\/strong>, although non-oil firms reported easing purchasing price inflation compared to the start of the year. \u201cNevertheless, the passing on of higher costs to customers remained only partial, as indicated by a marginal rise in selling prices.\u201d Firms continued to be cautious with their pricing as competition grew stiffer, and offered further price markdowns in a bid to gain new customers and orders. <\/p>\n

Higher employment despite lower optimism:<\/strong> Market sentiment dropped to its lowest level since January, the report read, despite forecasts indicating that the Kingdom\u2019s non-oil GDP will continue on an \u201cupward trajectory,\u201d Al Ghaith said. Meanwhile, employment levels grew during the month as firms looked to reduce their order backlogs. <\/p>\n

FROM THE REGION- <\/p>\n