Saudi Arabia's non-oil growth headline rate slows for first time in 2019
Company output slows, but new orders rose for the 15th consecutive month
Saudi Arabia’s non-oil economy continued to display strong signs of growth in July, but the headline rate of growth declined slightly for the first time this year.
The IHS Markit Saudi Arabia Purchasing Managers' Index reached 56.6 in July, which was a slight decline from the 19-month high of 57.4 recorded in June and the weakest rate of growth recorded since February. A reading above 50 indicates an expansion in business activity.
The marginal decline in the headline rate was attributed to a slower increase in output, but July still represented the 15th successive month in which an increase in new orders was recorded. This was in part due to strong domestic demand, but export orders also rose for the fifth consecutive month.
“[Exports] continue to show signs of recovery following an underwhelming couple of years,” said Phil Smith, principal economist at IHS Markit, who authored the report.
Survey data showed a “marginal” increase in employment rates, although overall staff costs fell slightly during the month and a lack of movement in purchasing prices meant overall input costs remained fairly flat.
“Amid a competitive environment for new work, which continues to restrict firms’ pricing power and encourage cost efficiency, extra staff recruitment was kept to a bare minimum,” Mr Smith said.
Optimism levels for the year ahead also weakened slightly for the third month in a row.
In May, the International Monetary Fund said it expects Saudi Arabia's economy to grow at a rate of 2.9 per cent this year, up from 2.2 per cent in 2018.
“Over the medium-term, the team expects a strengthening in non-oil growth to around 3 to 3.25 per cent as the ongoing reforms yield dividends and overall real GDP growth to settle around 2.5 per cent,” the IMF said.
Updated: August 5, 2019 01:05 PM