May 5, 2020 / 4:23 AM / a month ago

Saudi non-oil private sector contracts again, output hits new low: PMI

DUBAI (Reuters) - Saudi Arabia’s non-oil private sector shrank for the second consecutive month in April and its output hit a record low as lockdowns and business closures to tackle the new coronavirus hammered the economy, a survey showed on Tuesday.

The seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers’ Index (PMI) rose slightly to 44.4 in April from 42.4 in March, which was the lowest reading since the survey began in August 2009.

April is only the second time the headline index has fallen below the 50.0 mark that separates growth from contraction. The slight rise from March reflected “a slower reduction in new work and a stronger contribution from the suppliers’ delivery times component,” the survey compilers wrote in a report.

“Saudi Arabian private sector output fell at the fastest pace since the survey began more than a decade ago, reflecting widespread business closures and a sharp reduction in customer demand,” said Tim Moore, economics director at IHS Markit.

“Export sales and international supply chains were also severely impacted by the global COVID-19 pandemic in April, with both indices hitting survey-record lows,” he said.

As of May 3, Saudi Arabia had reported 27,011 cases of COVID-19, the disease caused by the new coronavirus, and 184 deaths - both the highest out of the six Gulf Cooperation Council countries.

The kingdom has taken strict measures to curb the virus, including curfews, business closures and travel restrictions. It has allowed some malls to reopen for limited hours, but restaurants, schools, mosques and other public places remain shut.

The output sub-index of the IHS Markit survey slipped to a record low at 37.5 in April from 37.9 in March.

New work decreased sharply in April and the employment sub-index fell at the steepest pace since the survey began over a decade ago.

Future sentiment improved marginally from a record low in March but remained at a historically low level, with just over half of respondents expecting higher output over the coming year.

The COVID-19 pandemic, coupled with historically low oil prices, has hit Saudi Arabia hard and strained its plans to diversify the economy away from oil. It is expected to have a much wider fiscal deficit as a result.

Reporting by Yousef Saba; Editing by Hugh Lawson

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