March 3, 2020 / 4:33 AM / a month ago

Saudi non-oil private sector growth slowest in nearly two years - PMI

DUBAI, March 3 (Reuters) - Saudi Arabia’s non-oil private sector expanded in February at its slowest pace in almost two years, pulled down by falling output and new orders as well as supply chain disruptions caused by the coronavirus, a survey showed on Tuesday.

FILE PHOTO: Buildings are seen in Riyadh, Saudi Arabia, December 18, 2017. Picture taken December 18, 2017. REUTERS/Faisal Al Nasser

The seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers’ Index (PMI) fell to 52.5 in February - the slowest growth since April 2018 - from 54.9 in January. It remained above the 50.0 mark that separates expansion from contraction.

“The latest survey data highlights a sharp loss of momentum since the start of 2020, with overall business conditions improving at the slowest pace for almost two years,” said Tim Moore, economics associate director at survey compiler IHS Markit.

“February data revealed additional challenges from international supply chain disruptions following the COVID-19 outbreak in China, with firms seeking to build up inventories and source alternative suppliers of critical components,” he said.

Saudi Arabia, the world’s biggest oil exporter, has been pushing to boost its private sector and diversify its economy away from oil, which accounts for the bulk of its revenues.

But falling oil prices have weighed on Saudi growth in the past five years, and the coronavirus outbreak that began in China has compounded growth problems for the kingdom.

Official data released on Sunday showed Saudi Arabia’s real gross domestic product grew 0.3% in 2019, below the government’s forecast of 0.9% and down from 2.4% in 2018.

The marginal growth, however, was mainly driven by expansion in the non-oil sector, which grew by 3.3%. (Full Story)

Non-oil private sector growth averaged 57.1 in 2019, the PMI data showed, up from a 53.8 average in 2018, when growth was subdued after Riyadh introduced a 5% value-added tax to boost non-oil revenue after oil prices plummeted from mid-2014.

But momentum began to slow in December, when the overall index fell to 56.9 from 58.3 in November. Growth slipped further in January, when the overall PMI fell to 54.9, which was its slowest growth since December 2018.

In February, new orders contracted for the first time since April 2018, falling to 49.3 from 52.6 in January, in its turn a sharp drop from 64.1 in December.

Employment remained stagnant in February, with the lowest rate of job creation since March 2019.

Reporting by Yousef Saba, editing by Larry King

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