IHS Markit: Saudi job creation, new orders accelerate in June

IHS Markit: Saudi job creation, new orders accelerate in June
Saudi hiring is on the rise as signs emerge that inflation has eased. (Reuters)
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Updated 06 July 2021

IHS Markit: Saudi job creation, new orders accelerate in June

IHS Markit: Saudi job creation, new orders accelerate in June
  • Business activity increased for the tenth consecutive months in June, as Kingdom recovers from the impact of COVID-19

JEDDAH: Business activity in the Saudi non-oil private sector in June grew at its fastest rate since January, amidst a surge in new orders and job creation rising at its quickest pace for 19 months, according to the latest monthly research from IHS Markit.

The latest purchasing managers index (PMI) for June found that while input prices rose, there are signs that inflation is set to peak. At the same time, strong discounting remains, meaning output prices only increased slightly.

June posted a score of 56.4, the tenth month a row that business conditions have improved — a clear sign that the Kingdom is beginning to recover from the impact of the coronavirus disease (COVID-19) pandemic. A score of over 50 on the PMI indicates expansion, while a score below 50 implies contraction in business activity. “Demand growth in the Saudi Arabian non-oil sector ramped up again in June, with the latest data signalling the strongest rise in sales since January. The rollout of COVID-19 vaccines and easing of restrictions also helped to lift confidence for future activity to a five-month high, as firms hope that the economic recovery will accelerate over the second half of the year,” David Owen, an economist at IHS Markit, commented on the latest PMI results. Owen also pointed to the positive signs in the employment sector, which has grown at its fastest rate since November 2019. While the pace of job creation was not at the same as growth in new orders, Owen was optimistic that continued positive sales growth would lead to a future surge
in recruitment.

One interesting factor was the strong performance of the Saudi domestic market. While foreign sales were strong, the June PMI said overall growth was led by the domestic sector, showing the overall resilience on the Saudi economy during the pandemic.

Saudi inflation in June rose for a second straight month as the consumer price index hit 5.7 percent, according to the General Authority for Statistics.

The growth in inflation highlighted the continuing impact of higher value added tax (VAT) which increased to 15 percent in July 2020 from 5 percent before.

However, looking ahead, James Swanston, Middle East and North Africa economist at London-based Capital Economics, forecast that headline inflation had peaked in June and would begin to decrease as the year progresses

“We think that the headline rate will slow to around 1.0-1.5 percent year-on-year and remain at this pace over the course of this year and throughout 2022-23,” Swanston said.