Saudi Arabia's non-oil activities decelerated in October even as the economy is showing strong signs of recovery from the pandemic, according to IHS Markit.
The Kingdom’s reading for the Purchasing Managers’ Index reached 57.7 in October, lower than the previous month’s 58.6, the country’s latest IHS Markit report revealed.
The monthly drop in the index was largely due to a decline in the new orders sub-index as it fell from its seven-year high in September. However, the report indicated that the sector still experienced a high level of sales during the month as demand regained momentum with the lifting of Covid-19 restrictions, including on travel.
Despite the fall in index, it is still the second highest level of the index since the start of the Covid-19 pandemic.
Non-oil sector output grew at the highest level in almost four years, IHS Market said. This was driven by a surge in client demand due to the elimination of pandemic-related restrictions.
Employment numbers also rose, continuing the growth sequence seen in each month since April. However, the rate of job creation was only marginal, as sufficient capacity to meet demand meant that firms often chose to keep staffing levels unchanged.
Input costs continued to rise solidly during October. The rate of purchase cost inflation quickened to an 11-month high, as greater raw material prices and freight rates were highlighted by surveyed firms.
"The output price component in Saudi rose to its highest level since August last year – following the tripling of the rate of VAT," James Swanston, Middle East and North Africa Economist in Capital Economics, commented in a note issued today.
"We’ve seen a strong recovery in Saudi Arabia over the past few months. In addition to an improvement in the external environment as exports and demand for exports have improved in October compared to the past months and that’s what had led to that growth in Kingdom’s headline PMI over the past few months," Khatija Haqq, chief economist and head of research at Emirates National Bank of Dubai, said in an interview to ASharq Business TV today.