Saudi Arabia’s non-oil private sector growth slows in September

PMI readling falls but still well into expansion territory although recent announcements of spending cuts are likely to weigh on household consumption.

Growth in Saudi Arabia’s non-oil private sector slowed in September as new orders expanded more slowly and employment growth moderated, a corporate survey showed on Wednesday.

The seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index, fell to 55.3 last month from 56.6 in August, but held well above the 50 mark denoting expansions in activity.

Saudi Arabia’s economy has been hit hard this year by austerity measures imposed to curb a huge state budget deficit. But so far PMI readings have shown the private sector continuing to grow.

“Saudi Arabia’s PMI eased only slightly in September, on weaker new order growth. However, the average PMI for the third quarter of 2016 points to a faster rate of expansion in economic activity compared to the first half of this year,” said Khatija Haque, the head of regional research at Emirates NBD.

“Recent announcements on spending cuts in the Kingdom are likely to weigh on household consumption and consumer confidence however, as we head into the fourth quarter.”

Output growth decelerated, with the subindex slipping to 61.5 in September from 63.5 in the previous month, while new order growth slowed to 56.5 from 60.2. Employment growth slowed, with the subindex easing to 51 from 52.4.

Output prices fell outright last month for the first time in four months, with the subindex at 49.8, while input price inflation stayed positive, although the subindex fell sharply to 50.7.

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