Saudi Arabia PMI: Employment index contracts in March

Saudi Arabia PMI: Employment index contracts in March
Saudi Arabia’s private sector remains optimistic about output next year, although the degree of optimism has softened since the start of 2019. (AFP)
Updated 07 April 2019

Saudi Arabia PMI: Employment index contracts in March

Saudi Arabia PMI: Employment index contracts in March
  • Saudi Arabia’s private sector remains optimistic about output next year
  • But the degree of optimism has softened since the start of 2019

DUBAI: Saudi Arabia’s non-oil private sector marginally grew in March but its employment index fell below the neutral 50-level for the first time in five years, a monthly survey of companies reported on Sunday.

The seasonally-adjusted Purchasing Managers’ Index rose to 56.8 in March from 56.6 in February, versus a small decline in the employment sub-index to 49.8, Emirates NBD said in the report.

A reading above 50 indicates expansion and below that contraction.

But “the rebound in new orders and business output in recent months has not fed through to job growth, with private sector employment declining for only the third time in the series history last month,” said Khatija Haque, head of MENA research at Emirates NBD.

The Saudi private sector struggled last year because of fuel price hikes, the introduction of a 5 percent value-added tax and higher fees for hiring foreign workers.

The improvement in March was led by a continued rise in new business, the highest since April 2015, the PMI showed. The new orders sub-index rose to 65.5 in March, an almost four-year high, while the output sub-index rose to a seven-month high of 59.6, up marginally from 59.2 in January.

“There also appears to be very little pricing power for firms, with selling prices declining (albeit only marginally) for the fifth month in a row,” Haque said.

For the UAE, the country’s PMI rose to 55.7 in March after slowing to a 28-month low in February at 53.4.

The output sub-index rose to 63 from 59.3 in February – recovering to January levels, while the new orders sub-index rose to 59.0 after dipping to 55.0 in the previous month.

“The acceleration in output and new orders suggests that demand has improved, although this was likely supported by further declines in selling prices in March. The environment remains competitive for businesses,” Haque said.

Egypt’s non-oil private-sector activity, meanwhile, contracted for the seventh consecutive month in March, though it saw its highest reading since August, a survey showed on Sunday.

Still, the country’s PMI strengthened to 49.9 in March from 48.2 in February.

The March reading was a considerable improvement from February’s 17-month low, the PMI report said, as it signaled “a broad stabilization of the health of the Egyptian non-oil private-sector economy.”