Saudi Arabia’s non-oil private sector economy grew at a slow pace in December 2021, as concerns about the rapid spread of the COVID-19 Omicron variant hit customer demand and business confidence, according to the latest business survey.
The seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers’ Index (PMI) fell three points from 56.9 in November to 53.9 in December, marking solid growth but falling well below 2021’s average of 55.8 and the series average of 56.8. The reading was the lowest since March, but still indicated a solid improvement in operating conditions across the non-oil private sector economy.
Growth in output slowed, with the subindex at 57.3 in December compared with 61.7 in November. Growth in new orders weakened for a third straight month to hit its slowest pace since March, while the expansion in new export orders slowed to an eight-month low.
“The latest data pointed to particularly sharp slowdowns in new order growth across manufacturing and services, as panelists often commented on canceled bookings and weaker client demand,” said Mr. David Owen, an economist at survey compiler IHS Markit.
The slowdown in demand growth also meant that more firms had time to complete orders, leading to a faster decrease in outstanding work. Sufficient capacity to deal with the workloads also meant a drop in the employment subindex to a four-month low, only fractionally above the neutral 50 mark.
“The slower pace of economic recovery prompted firms to give a weaker projection for future output, with confidence slipping to an 18-month low. Alongside the Omicron variant, faster inflation and strong competition were also mentioned by companies with a downbeat outlook,” Mr. Owen said.
The degree of confidence was the lowest seen for a year-and-a-half, with companies only reporting weaker sentiment during the first wave of the pandemic. Just 8 percent of firms were hopeful that output will increase in 2022, with optimism linked to expectations of higher demand and new product releases, the survey showed.
