The non-oil private sector of Saudi Arabia continued to expand in July but at a slower pace. This is signaling that business conditions remain difficult as the largest Arab economy recovers from the coronavirus crisis.
The seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers’ Index stood at 55.8 in July down from 56.4 in June, due to weaker growth in output, new orders, and employment compared to the previous month. David Owen said that the Saudi Arabia PMI continued to signal strong growth in the non-oil economy in July. The survey data related to business capacity emphasized that challenging economic conditions prevailed.
The firms are hiring but at a slower pace, with the employment sub-index dropping to 50.2 from 51.1 in June. Expectations for future growth were at their lowest since April, contributing to the decline in staffing increases.Saudi Arabia is the world’s largest crude exporter, was hit hard last year as lower global energy demand weighed on oil gross domestic product while the non-oil economy suffered because of coronavirus-related restrictions. The economic activity is back to form this year. The International Monetary Fund expects a 2.4% economic growth from a 4.1% contraction last year.
The survey showed that despite slowing for a second consecutive month, output remained strong in July supported by rising demand and the easing of pandemic-related measures. Owen said that the sustained rises in demand should help the economy move closer to full capacity over the second half of the year. However, a drop in business expectations to its joint-weakest since June 2020 illustrated growing doubts that this will be a smooth ride.