Saudi Arabia's non-oil economy slows in April as new orders contract

The record low PMI reading comes despite a rally in oil prices

A key gauge of business conditions in Saudi Arabia’s non-oil private sector deteriorate to record lows in April. Aya Batrawy / AP Photo

A key gauge of business conditions in Saudi Arabia’s non-oil private sector deteriorate to record lows in April as new orders contracted and job creation eased in the region's biggest economy.

That slowdown comes even as oil prices rallied this year and the Saudi Arabia, the biggest oil exporter in the world, boosted spending.

Emirates NBD’s Saudi PMI survey slipped to 51.4 from 52.8 in March. A reading above 50 in the purchasing managers’ index suggests the non-oil economy is growing, while a reading below 50 indicates a contraction. The survey is sponsored by Dubai-based lender Emirates NBD and produced by IHS Market.

“The further softening of the non-oil activity in April is surprising given the sharply higher oil prices so far this year, as well as the expansionary budget that was announced for 2018,” said Khatija Haque, head of Middle East and North Africa research at Emirates NBD.

“Firms have cited subdued domestic demand as a reason for the decline in new orders last month, although export orders declined as well.”

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Demand for goods and services produced in Saudi Arabia fell in April and the contraction was the first that’s been recorded since the survey started in 2009.

Purchasing managers polled for the survey, however, said that the current slowdown was temporary and expressed confidence about the prospects of improvements in business conditions in the year ahead.