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The non-oil economy grew at its slowest rate in two years, but remains firmly in growth territory,according to the Riyad Bank Saudi Arabia PMI report (pdf) out yesterday. Headline PMI declined to 55.4 in January, down from 57.5 in the previous month.
There was an increase in new business activity,fuelling increased input demand as purchasing activity and inventory holdings also increased — albeit at an eight-month low in purchasing growth.
Input price inflation recorded its highest level since August 2020 on the back of greater supply chain risks, and increased staff costs. Business raised selling prices in response, but modestly and slowly as sellers were reluctant to pass on the costs to their customers, with construction firms even reducing their prices.
Purchase prices recorded the sharpest rise since May 2012 — with firms noting strong demand, higher material prices, greater supply chain risks, and higher shipping costs amid the Red Sea crisis.
Input costs rose at their fastest pace since May 2012… This was driven by higher shipping prices due to Red Sea disruptions, an uptick in material costs and increasing supply chain risks, the survey showed.
The outlook: Market sentiment dropped to the second-weakest in January, since mid-2020, citing slowed demand growth and inflationary pressures to pose limitations to firms’ business expansion this year. However, the backlog of work in Saudi registered an expansion for the first time in four years, particularly in the construction sector, reflecting strong demand for construction services, attributed to ongoing infrastructure and real estate development, Riyadh Bank Chief Economist Naif Al Ghaith commented.
AROUND THE REGION-
- Output growth in the UAE slowed to a five-month low in January, EnterpriseAM UAE reports this morning. The PMI there inched down to 56.6 from 57.4 in December, still remaining above the 50.0 threshold that separates growth from contraction.
- Egypt’s PMI contracted for a 38th consecutive month, EnterpriseAM Egypt notes.
