Saudi non-oil sector growth drops in December– IHS Markit

Saudi non-oil sector growth drops in December– IHS Markit
Saudi non-oil sector growth drops in December– IHS Markit

Riyadh – Mubasher: Saudi Arabia’s non-oil private sector growth weakened in December, reaching 54.5 points, compared to 55.2 points in the month before, a new report sponsored by Emirates NBD and produced by IHS Markit revealed.

This decline reflected the weak expansion in the kingdom’s private sector, compared to previous years, said Daniel Richards, MENA economist at Emirates NBD.

“The renewed dip in the headline index following November’s 2018 high confirms this year as the weakest in the series, averaging 53.8 as compared to an annual average of 58.0 over the previous eight years,” Richards explained.

Although Saudi non-oil output declined in December from a November peak, it remained above the 2018 average of 57.6, having registered 58.2, the report indicated.

Meanwhile, new orders tumbled to 58.4 points last month, compared to the previous month, although they were “still stronger” than December 2017.

 “However, new export orders remained weak implying that the bulk of new orders are being driven by domestic demand, achieved through continued price discounting. Output prices decreased at a marginally faster pace in December, as firms continued to cite strong domestic competition,” the IHS Markit report said.

These reported weaknesses would have resulted in “margin pressure” for Saudi firms in December, because “while output prices decreased, input prices remained in expansionary territory,” the report highlighted.

In terms of purchase prices, these grew with 4% of survey respondents noting higher costs on the back of increased prices for equipment and raw materials.

Staff costs also increased to “the fastest pace since June,” the report noted, stressing that while this was the fastest pace since June, it was also a slower pace than purchase costs.

“Business optimism remains strong in Saudi Arabia, and the future output index climbed to the highest reading in five years. 53.8% of respondents expect that output will be higher in 12 months’ time, with no firms expecting a deterioration in conditions,” the Emirates NBD-IHS Markit report highlighted.