Saudi Arabia’s non-oil growth slowed down slightly in March, with the kingdom’s Purchasing Managers’ Index (PMI) dropping to 56.4 from an 18-month high of 57.0 the previous month, Emirates NBD said in a report on Tuesday.
“Nevertheless, the latest reading was consistent with a marked improvement in the overall health of the sector,” the lender noted.
The above-50.0 reading reflected a continued increase in output and new work, although the respective rates of expansion for both eased from the previous monthh.
New business growth was mainly driven by domestic demand, rather than exports, in March.
The increase in new orders led firms to boost input buying, Emirates NBD said, adding that several survey participants cited more projects and forecasts of improving demand as the main factors leading to stock-building initiatives.
Companies in the kingdom also increased payroll numbers in March in response to greater output requirements, but the rate of job creation was only marginal.
Elsewhere, purchase prices rose at a solid pace during the month, due to greater demand for raw materials.
However, intense competition meant businesses were unable to fully pass on higher cost burdens to clients amid intense competition.
“Saudi Arabia's non-oil economy appears to be holding up well amidst ongoing reductions in oil production,” said Tim Fox, Head of Research and Chief Economist at Emirates NBD.
“Unlike previous periods of expansion however, gains in output and new orders are not being matched by new job growth, while competitive pressures appear to be keeping a lid on the prices firms are able to charge to customers.”
Looking ahead, firms remained optimistic towards output over the coming year due to projects in the pipeline, construction work and expectations of improving demand.
The Emirates NBD PMI is based on data compiled from a survey of companies in manufacturing, services, construction, and other non-oil sectors. A level over 50 indicates an increase, while below 50 indicates contraction.
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