Non-oil business activity in Saudi, UAE improves

Business activity in the nonoil private sector economies of Saudi Arabia and the UAE continued to improve in July, with a strong increase in output, new orders and employment despite a rise in inflationary pressures. The headline seasonally adjusted S&P Global Saudi Arabia Purchasing Managers’ Index posted 56.3 in July, slightly lower than 57 in June, but signaled a robust improvement in business conditions for the 23rd month in a row. A reading above the neutral level of 50 indicates growth while one below it points to a contraction. “The Saudi Arabia PMI remained firmly in growth territory in July. New business continued to rise substantially, helped by recovering demand and strengthening export sales,” David Owen, an economist at S&P Global Market Intelligence, said. “Output expanded sharply and employment numbers rose at the fastest pace since September 2019, following a period of weakness in labor markets since the COVID-19 pandemic began.”

Although the expansion in the kingdom’s non-oil businesses activity was slightly softer than at the end of the second quarter, five times as many companies saw an increase in activity month-on-month compared with those that recorded a decline. Businesses surveyed attributed the expansion mainly to higher sales, new projects and stronger marketing. New work intake in the kingdom also rose markedly in July, with the latest upturn being the second-quickest in eight months. Improving market conditions at home and strengthening new export orders that rose at the sharpest pace since November helped the growth momentum at the beginning of the third quarter.

With new orders increasing rapidly, businesses were encouraged to raise employment levels further in July, extending the current period of growth to four months. The pace of job creation in the kingdom was the quickest since September 2019. Backlogs of work also decreased at the start of the third quarter, with the sharpest rate of decline in just over two years. Efforts to complete unfinished orders were helped by a rise in buying activity, as businesses expanded inventories to cope with stronger demand.

Demand continued to pick up across the non-oil sector amid optimism for future economic growth. Business confidence in July remained one of the strongest seen since the pandemic began.

Saudi Arabia’s economy grew by 11.8 per cent in the second quarter of 2022, with oil-related economic activity in the kingdom rising 23.1 per cent annually. Non-oil economic activity climbed 5.4 per cent during the period, supporting the growth of the Arab world’s largest economy, according to flash estimates released by the kingdom’s General Authority for Statistics last week. The International Monetary Fund estimates that the Saudi economy will expand by 7.4 per cent this year, driven by higher oil revenue, a projected improvement in the country’s non-oil gross domestic product and its efforts to diversify the economy.—AFP