RIYADH: Saudi Arabian non-oil business activity expanded at its fastest rate since December 2017, as new business and export orders increased, according to a survey released on Thursday.
The seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers’ Index (PMI) rose for the second month in a row, from 55.2 in April to 56.4 in May. A score above 50 indicates expansion, while below 50 points to contraction.
While activity is recovering from the pandemic slump, the impact has not yet been felt in recruitment; hiring increased for the second month in a row, but the pace slowed.
As pandemic restrictions begin to loosen, 30 percent of companies said they had seen an increase in business activity, and export orders increased at the fastest rate since 2015.
“Most firms continued to operate with unchanged workforce numbers, suggesting a focus on boosting productivity back to pre-COVID levels,” said David Owen, an economist at IHS Markit. “On the plus side, inventories were increased at the quickest pace in a year-and-a-half as firms prepare for a further recovery in demand over the coming months.”
Last month, a “flash estimate” from the Kingdom’s General Authority for Statistics (GAS) showed that the non-oil economy grew by 3.3 percent year-on-year in the first quarter, its first positive outcome on an annualized basis since last March.
Despite the robust performance from the non-oil sector, real gross domestic product was 3.3 percent down year-on-year.
“The year-on-year change was the result of the sharp decrease in the oil activities of minus 12 percent due to ongoing crude oil production cuts agreed by OPEC+ since May 2020,” GAS said.
In addition to cuts agreed by OPEC+, the oil producers’ alliance led by Saudi Arabia and Russia, the Kingdom decided on an extra voluntary cut of one million barrels of oil per day last February.
Jason Tuvey, analyst at London-based Capital Economics, said: “With oil output cuts now being eased and the vaccination program gathering pace, the economic recovery should get back on track over the rest of this year.”