Riyadh – Mubasher: Saudi Arabia’s headline seasonally adjusted Purchasing Managers’ Index (PMI) declined to 58.5 in May 2023 from 59.6 last April due to downward movements in new orders and output.

The index was still above the 50 growth mark and higher than its long-run average of 56.9, according to Riyad Bank’s latest data.

Demand strength reflects a further surge in output, employment, and purchasing. Staff levels increased at the joint-fastest rate since January 2018.

However, strong wage pressures lead to a jump in firms' output prices during May, with the pace of inflation accelerating to the highest for nearly three years.

New order inflows at non-oil private sector businesses continued to hike in May, as growth quickened to its highest in just over eight-and-a-half years in April.

In like manner, the employment growth was relatively strong, with the rate of job creation picking up to the joint-fastest since the beginning of 2018.

Nonetheless, some businesses increased their salaries amid labour shortages and rising living costs, which caused a sustained uplift in staff expenses that was the second-quickest since September 2016.

Higher employment and activity levels allowed businesses to work through backlogs at a quicker pace in May. Meanwhile, the volume of outstanding business fell the most since November 2022.

Naif Al Ghaith, Chief Economist at Riyad Bank, said: “The Kingdom’s non-oil GDP is likely to have notably grown in the second quarter (Q2) this year thanks to the healthy state of the private sector.”

Al Ghaith noted: “While a slower oil economy and rising interest rates will create a challenging environment for some establishments, most Saudi firms are in good shape and experiencing robust business conditions. May results show a small retracement from the strong April outcome, reinforcing the view that overall economic activity is holding up well as we enter the summer months.”

“New orders grew considerably, reflecting a strong demand growth, particularly in tourism activities and construction. This led to the joint-fastest rate of job creation since 2018 which allowed firms to work through backlogs at a quicker pace this month,” he indicated.

The economist added: “Higher employment and activity levels have driven wages to rise at the second-fastest pace in seven years, leading to a sustained markup in prices charged to consumers.”