Saudi, UAE Non-Oil Sectors Remain Subdued

Saudi Arabia’s non-oil sector activity cooled off in July, following a small growth in the previous month due to a build-up in the backlog of projects, according to a new survey of companies.

The Emirates NBD Purchasing Managers’ Index for Saudi Arabia eased to 54.9 in July down from 55 in June, according to the survey, AFP reported.

Readings above the 50-mark indicate growth and below 50 signal contraction. The index is a composite indicator designed to give an overview of operating conditions in the non-oil private sector economy. The survey is sponsored by Dubai’s biggest lender, Emirates NBD, and produced by IHS Market.

“Although the index has rebounded over the last couple of months, year-to-date the headline PMI averaged 53.4, well below the 56 average for the same period last year, which indicates a much slower rate of growth in the kingdom’s non-oil private sector so far this year,” said Emirates NBD Mena research head Khatija Haque.

Despite a continuation of robust business conditions, backlogs increased due to delays in ongoing projects, with job creation in the non-oil private sector remaining historically subdued, the survey noted.

There was a softer increase in average cost burdens in July, due to easing input price pressures, with some firms seeking to boost client demand by offering discounts.

Business confidence in the non-oil sector also remained subdued for July compared with the performance so far this year.

Meanwhile, business growth in the UAE’s non-oil private sector slowed in July to a three-month low as output and work orders declined, leading to lower business confidence, according to a survey of companies.

Non-oil private sector growth fell to 55.8 points in July compared to 57.1 points in June due to a weak job market and lower selling prices in the last month, the survey said.

“Both output and new work, while still strong, were softer than in June,” Haque said. “The continued squeeze on firms’ margins is likely a factor in the soft employment survey, as firms remain under pressure to contain costs and boost efficiency.”

Output growth declined to 61.9, a three-month low in July but the rate of expansion was “sharp overall” and above the survey’s historical average, the survey said.

Growth in orders dropped to a four-month low but “remained solid” in terms of historical data.

Business confidence also “eased slightly” in July from the record high in June, according to the survey.